World Bank cuts UK growth forecast in first review since Brexit vote

The World Bank’s move mirrors similar revisions from the International Monetary Fund and the the Organisation for Economic Cooperation and Development

The World Bank said that the magnitude of any 'adverse long-run effects' will depend on the type of relationship that the UK ends up negotiating with the remainder of the bloc (Getty)

The World Bank has trimmed its growth forecast for the UK, in its first major review of the state of the economy since the country’s June vote to quit the EU.

In a sweeping global report, the Washington-based group says that it anticipates the UK economy to grow 1.2 per cent this year and 1.3 per cent next—a revision from previous estimates of 2.1 per cent annually for both years.

It predicts growth of 1.3 per cent in 2019.

“The Brexit vote had limited short-term cross-border financial market spillovers, partly reflecting the commitment for further policy accommodation by major central banks,” the bank writes.

“However, it will take time to resolve the uncertainty surrounding the future relationship between the United Kingdom and the EU, given the protracted nature of the negotiations for international trade agreements, and the unusual complexity of the issues in this case.”

In the longer term, the World Bank says that the magnitude of any “adverse long-run effects” will depend on the type of relationship that the UK ends up negotiating with the remainder of the bloc.

The World Bank’s move mirrors similar revisions from the International Monetary Fund and the Organization for Economic Cooperation and Development.

In July, soon after the 23 June vote, the IMF cut its 2016 UK GDP growth forecast from 1.9 per cent to 1.7 per cent and the 2017 forecast from 2.2 per cent to 1.3 per cent.

It doubled down in October when it trimmed its 2017 forecast further to 1.1 per cent. At the same time though, it revised up its 2016 growth forecast to 1.8 per cent on the back of stronger than expected growth in the second quarter of the year.

The World Bank's figures are also broadly in line with those of the UK's official domestic forecasters.

The Bank of England, currently expects growth in 2017 of 1.4 per cent, followed by 1.5 per cent in 2018. The Office for Budget Responsibility, the Treasury's official forecaster, meanwhile, has projected growth in 2017 of 1.4 per cent and 1.7 per cent in 2018.