Europe & Russia: Economic overview

March 2017

Political uncertainty threatens growth in Europe’s leading economies.

The UK’s GDP is forecast to grow by 1.6% this year, down from 1.8% in 2016. Growth is set to slow further next year, with the economy forecast to expand by just 1.0%. Uncertainty over its future trading relationship with the EU is weighing on the UK’s economic outlook. Rising inflation, which will hit consumption, and reduced business investment, caused by the uncertainty over Brexit, are also dampening the UK’s economic prospects for this year and next. Prime Minister Theresa May is set to trigger Article 50 on 29 March, which will start the formal process for the UK’s exit from the EU. Meanwhile, Scotland’s First Minister Nicola Sturgeon is pushing for another referendum on Scottish independence, and for Scotland to remain in the EU. Brexit and the potential for Scottish independence raise questions for the future of the UK’s gas market, supply and trade. In the short term, the weakening value of the pound against the euro and the dollar will continue to push up the cost of imports into the UK, including gas.