Money (20)

The UK economy is facing a "severe loss of momentum" following to vote to leave the European Union, a leading think tank has warned.

EY Item Club now expects the British economy to grow by 1.9% this year, having previously forecast a 2.3% increase. But for 2017, its estimate of 2.6% has be slashed to just 0.4%. The think tank expects growth of 1.4% in 2018, down from 2.4% in its earlier estimate.

The vote to leave the EU will result in "severe confidence effects on spending and business investment", it warned.

One silver lining, however, could be the UK's exports. Which a weaker currency known to boost exports, EY Item Club said Britain's outbound trade could rise by as much as 3.4%, with imports dropping 0.3%. The report claims this level of movement in exports would contribute 1.1% to economic growth in 2017, suggesting that the UK is in serious danger of a recession in 2017 if it does not boost exports.

Peter Spencer, chief economic advisor to the EY Item Club, said: "Heightened uncertainty is likely to hold back business investment, while consumer spending will be restrained by a weaker jobs market and higher inflation.

"Longer-term, the UK may have to adjust to a permanent reduction in the size of the economy, compared to the trend that seemed possible prior to the vote. But amongst the gloom, the weaker pound provides one silver lining to exporters, particularly those selling to the US and emerging markets."

Separately, a leading fund manager has said the Brexit will have a "horrible" impact on the UK economy. Richard Buxton, chief executive of Old Mutual Global Investors (OMGI) said leaving the European Union was "really bad news".

"I think the economy is going to judder to a halt [or] have a mild recession, but I don't think it is going to be as severe as some of these shares are pricing in... The real economy is only going to gradually emerge over the next three to six months," Mr Buxton told The Guardian.

And a survey by Deloitte found that 82% of FTSE 350 and large privately owned businesses plan to cut their spending in 2017. Deloitte said this was the biggest figure on record and compares with a score of 34% in the first quarter.