The UK should “narrowly avoid a recession” but real GDP growth will fall from around 2% before the EU Referendum to 0.6% in 2017, accountancy firm PricewaterhouseCoopers has predicted.
PwC also claimed that by 2018 UK house prices will be 8% lower than if the UK had voted to stay in the European Union.
Its UK Economic Outlook report for July read: “UK economic growth had already slowed from around 3% in 2014 to around 2% before the EU referendum due to slower global growth, but the vote to leave the EU is likely to lead to a significant further slowdown.
“We now project UK growth to slow to around 1.6% in 2016 and 0.6% in 2017, largely due to the increased political and economic uncertainty following the ‘Brexit’ vote.
“The UK would, however, narrowly avoid a recession in this ‘main scenario’.”
The report added: “House price growth is likely to slow due to uncertainty relating to Brexit.
“We do not expect a major house price crash, but average UK prices by 2018 could be around 8% lower than if the UK had voted to stay in the EU in our main scenario.
“We estimate that prices could be around 8% higher on average in 2018 than they were in 2015, although there is a broader than usual range of uncertainty around this central estimate.
“London may be particularly hard hit due to the weakening of international investor demand, with the impact of Brexit being to reduce average London house prices in 2018 by around £60,000 relative to a scenario where the UK voted to remain in the EU.”
PwC also posted two less likely alternative scenarios.
In an ‘early recovery scenario’ where good early progress is made on maintaining access to the EU single market GDP growth was expected to reach 1.5% in 2017
But with a ‘recession scenario’, where there is little progress made in early negotiations and the UK has to fall back on world trade organisation rules which would introduce tariffs on trade with the EU, growth would fall to -1% in 2017.