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Fitch forecasts UK investment to drop 5% next year after Brexit hit

By 2018 investment levels would be 15% lower than forecast before the referendum

A British Union flag flies in front of an EU flag during a pro-EU referendum event at Parliament Square in London, Britain
A British Union flag flies in front of an EU flag during a pro-EU referendum event at Parliament Square in London, Britain. Photo: Reuters
Reuters London
Last Updated : Jun 29 2016 | 6:01 PM IST

Credit ratings agency Fitch forecast on Wednesday that investment in the British economy will fall 5% next year, two days after it downgraded Britain's credit rating after last week's vote to leave the European Union.

"This uncertainty will prompt firms to delay investment and hiring decisions, while elevated financial market volatility will further damage business confidence," it said.

By 2018 investment levels would be 15% lower than forecast before the referendum, Fitch said, while economic growth in 2017 and 2018 would be 1 percentage point a year lower than before.

"Consumption will not be immune to this shock and overall spending by UK residents will see a mild decline in 2017. The sharp fall in the value of sterling will provide some offset to the demand shock, with exports likely to benefit somewhat in the near term," Fitch added.

Fitch downgraded the Britain's sovereign rating by one notch on Monday to "AA" from "AA+", and said the outlook was negative - meaning that it could further cut its judgement of the country's creditworthiness.

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First Published: Jun 29 2016 | 3:47 PM IST

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