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Major UK banks reduce growth forecast in 2017 post-Brexit

This file photo taken on May 08, 2014 shows the Barclays Bank headquarters in Canary Wharf, east London. (AFP)

Major banks in the city of London reduce their forecast for growth in the UK in 2017, with many warning of recession.

Barclays Capital predicts that UK GDP will shrink by 0.5 percent in 2017. In June, before the referendum took place, it had forecasted growth of 1.9 per cent.

Other banks such as Citigroup, JP Morgan, Goldman Sachs, Royal Bank of Scotland and Bank of America Merrill Lynch have also all dramatically reduced their predictions.

According to the index published monthly by HM Treasury, Bank of America Merrill Lynch had forecast a 2.3-percent growth, and now predicts a just 0.2-percent one.

After the Brexit vote in June, the pound fell to its lowest level in 31 years, around $1.3120, its lowest level since mid-1985. Nearly $3 trillion was also wiped off the value of world stocks.

International Monetary Fund has also made their predictions, asserting that Brexit causes "substantial" increase in economic, political, and institutional uncertainty.

The UK economy will expand 1.7 percent this year, according to the IMF, 0.2 percentage point less than forecast in April.

The IMF also predicts that in 2017, the UK's growth will slow to 1.3 percent, down 0.9 point from the April estimate and the biggest reduction among advanced economies.

“The real effects of Brexit will play out gradually over time, adding elements of economic and political uncertainty,” said Maurice Obstfeld, the IMF chief economist and economic counselor.

On June 23, some 52 percent (17.4 million) of British people voted to leave the EU after 43 years of membership.

The vote result caused political turmoil in Britain and sent economic shockwaves through the country as well as global financial markets. 

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