EU raises UK growth outlook, but warns of Brexit uncertainty

London - The European Commission raised its forecast for UK growth for a second time this year, while warning of a fallout from Brexit uncertainty and faster inflation.

The European Union’s executive arm revised up its 2017 projection to 1.8% from 1.5%, and the 2018 estimate to 1.3%.

It sees consumer-price growth accelerating to 2.6% this year, slightly more than it predicted in February, which will weigh on consumer demand. It also expects stagnation in business investment, partly related to firms deferring decisions because of Britain’s exit from the EU.

The Bank of England will publish new forecasts for growth and inflation later on Thursday, alongside its latest monetary-policy decision. Economists are expecting it to lift its estimate for 2017 consumer-price growth and lower those for output.

The commission sees an upside to growth from exports, which will be supported by the weaker pound, and said the labour market is “expected to remain resilient.” But it also forecast expansion of 0.3% in most quarters this year. The average in 2016 was 0.5%.

“The waning profile of quarterly growth reflects fading household consumption growth and stagnant business investment,” it said.

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