Bank of England Downgrades Its Economic Forecast As Brexit Deadline Approaches

The Bank of England has again cut its growth forecast for the United Kingdom (U.K.) and warned that the potential for damage to the economy from Brexit has increased.

As the U.K. approaches the March 29 deadline to leave the European Union without yet having a deal for a new relationship settled, businesses are slashing spending and consumers are growing more worried. Now, the central bank is forecasting a sharp downturn in investments.

In a statement, the Bank of England said that "uncertainty had intensified," and now forecasts 1.2% economic growth this year, down from 1.7% predicted just three months ago, the biggest downgrade since the 2016 referendum on whether the U.K. should leave the European Union.

The latest outlook came alongside the Bank of England’s latest policy decision, led by Governor Mark Carney. The central bank voted 9-0 to hold its key interest rate at 0.75%, as predicted by all economists in a Bloomberg survey. The bank last lifted its key rate in August 2018.

With Brexit hanging over the economic outlook, the central bank said that its forecasts would need to be updated "once greater clarity emerged about the nature of European Union withdrawal." Acknowledging the huge impact of uncertainty, it ran an analysis showing that less uncertainty would lead to much stronger growth -- 1.6% this year and 2.2% in 2020.

The Bank of England cut its forecast for business investment to a 2.75% drop this year, having previously predicted a 2% increase.