UK GDP growth to slow to 1.7 per cent in 2017 says think tank

The latest forecast by the National Institute of Economic and Social Research also assumes a hike interest rates by the Bank of England in the first quarter of 2018

The pound suffered a pummelling in the aftermath of last June’s Brexit vote (PA)

Growth in the UK economy will slow to 1.7 per cent in 2017, according to the latest forecast from the National Institute of Economic and Social Research (NIESR).

That would be down from the 1.8 per cent growth recorded in 2016, reflecting the spike in inflation since last year's Brexit vote.

Growth in the second quarter was 0.3 per cent, according to the Office for National Statistics, having expanded by just 0.2 per cent in the first quarter.

However, Niesr, in its latest economic review, sees GDP growth picking up to 1.9 per cent in 2018 and the Bank of England raising interest rates in the first quarter of next year, having previously not expected this to happen until the middle of 2019.

It expects inflation, currently at 2.6 per cent, to peak at 3 per cent in the final quarter of this year.

The latest Niesr forecast is in line with that of the IMF, which last month projected UK growth of 1.7 per cent in 2017, although this was down from 2 per cent previously.

The IMF also expects UK growth in 2018 to fall to 1.5 per cent.

The Bank of England will unveil its own updated GDP forecasts in its Inflation Report on Thursday.

Niesr's UK forecast, which is unchanged since its May projections, contrasts with a sharp upgrade in its global GDP forecast, driven by a pick-up in the eurozone and Japan.

It expects global growth of 3.6 per cent in 2017, up from the 3.3 per cent forecast in May.

This would be the fastest growth for the international economy in six years.

"To avoid jeopardising the recovery, central banks in the advanced countries will have to manage policy normalisation with particular caution," it says.