A think tank has warned of the possibility that the economy may slow down over the next two years in the face of trading uncertainty.
The National Institute of Economic and Social Research (NIESR) forecast the UK economy to grow by 1.7 per cent this year and 1.9 per cent in 2018.
Comparatively, the UK’s two per cent growth in 2016 meant it was the fastest growing country in the developed world.
Simon Kirby, head of macroeconomic modelling and forecasting at NIESR, said the “robust consumer spending growth” behind the economic momentum of 2016 will be cut short by rising inflation.
Mr Kirby claimed that households would see their purchasing power “eroded” over the next two years due to sharply rising costs.
NIESR predict that inflation will grow 3.3 per cent this year and 2.9 per cent in 2018. Compared to 1.2 per cent inflation growth in 2016, along with the devaluation of the pound, it argued that price rises will be very much apparent.
“Consumers face significant headwinds this year and next. Most notably, the pass through from the recent depreciation of sterling to consumer prices is expected to erode the purchasing power of households this year and next,” said Mr Kirby.