Brexit will have less of an impact on the British economy than initially thought, according to the Organisation for Economic Cooperation and Development (OECD), which has revised up its UK growth forecasts.
According to its November Economic Outlook, UK growth forecasts were increased from 1.8% to 2% this year, and from 1% to 1.2% in 2017.
The OECD, along with the Bank of England, was one of the forecasters criticised for overstating the impact Brexit could have on the UK economy.
Although the forecast assumes the UK will obtain the ‘most favoured nation' status under the World Trade Organisation when it leaves the EU in 2019, the uncertainty surrounding the negotiations provides a major downside risk, Bloomberg reported.
The OECD said less investment and rising inflation, which would impact consumer spending, could prove more troublesome than expected.
Furthermore, the organisation predicted UK growth will increase by just 1% in 2018, with inflation rising to over 3%.
The OECD said: "The unpredictability of the exit process from the European Union is a major downside risk.
"Uncertainty could hamper domestic and foreign investment more than projected and the pass-through of currency depreciation to prices could be larger, deepening the extent of stagflation."
However, it added: "Improved prospects of an orderly exit from the European Union while retaining strong trade linkages with the bloc would support near-term growth more than projected."
£1m target for Cancer Research UK
Regulator warns of risk to over-55s
Group led by Ed Dymott
Don’t pay for familiarity
Investment sector reaction