UK Economy Faces Slowdown On Political Turmoil, Brexit: CBI Business Lobby

Britain's economy will slow in the coming years, the CBI business lobby warned Tuesday, blaming domestic political turmoil -- and the impact of Brexit one day after EU divorce talks began.

The economy will expand by 1.6 percent this year before slowing to 1.4 percent in 2018, according to upgraded forecasts from the Confederation of British Industry, after 1.8-percent growth in 2016.

The CBI, which is Britain's biggest employers' grouping, also cited fallout from this month's inconclusive general election.

"The UK is expected to see steady but subdued economic growth over the next couple of years," it said in a statement.

"The economy continues to face headwinds, with ongoing political uncertainty and Brexit negotiations, which will require careful navigation by business and the government."

The latest growth forecasts marked upgrades from prior guidance of 1.3 percent and 1.1 percent, for 2017 and 2018 respectively.

Economy 'shifts down a gear'

"Growth should be steady, if restrained, over the next couple of years as the pace of the economy shifts down a gear," added CBI director-general Carolyn Fairbairn.

"While the country's exporters should emerge as a real catalyst of growth, rising inflation and stubbornly low wage growth mean that people are already starting to feel the pinch.

"So, after a frantic period in Westminster, this is the time for a renewed focus on the economic fundamentals of this country."

Britain and the European Union finally kicked off formal Brexit talks in Brussels on Monday, vowing to work constructively for a deal despite disarray in London over whether to go for a "hard" or "soft" divorce.

Conservative Prime Minister Theresa May has repeatedly insisted that Britain will leave Europe's single market or tariff-free zone in order to control EU immigration, thus delivering a so-called "hard" Brexit.

However, May's position weakened this month as she failed to secure an absolute majority in the election -- which the premier had called to strengthen her negotiating hand.

Meanwhile on Monday, five major British business bodies called in a letter to economy minister Greg Clark for continued access to the European single market until a Brexit agreement has been sealed.

The groups -- comprising the CBI, the British Chambers of Commerce, the EEF manufacturers' organisation, the Federation of Small Businesses and the Institute of Directors -- all urged the government to "put the economy first".

UK economy is 'centre stage'

"The interesting opportunity that we have is for the economy to be back centre stage," Fairbairn told reporters on Monday.

"Our view is that there has not been enough emphasis on the economy in the past few months."

She added: "One of the things that we are hearing from all parties is the importance of the economy right now -- the impact on people's lives -- because that is what's going to make a difference to productivity, to fairness, to living standards.

"So... we would hope to see that having a real impact on those negotiations."

Later on Tuesday, British finance minister Philip Hammond will deliver a Brexit-themed speech in central London.

The Mansion House event had been cancelled last Thursday after the Grenfell Tower fire disaster.