The uncertainty over Brexit hangs over the latest forecast for British economy, with a leading economic think-tank predicting growth of 1.9 percent next year with a frictionless Brexit but just 0.3 percent if there is a Brexit without a divorce agreement between Britain and the European Union (EU).

The future relationship between Britain and the EU remains unclear, the London-based think-tank, the National Institute for Economic And Social Research (NIESR), said in its latest quarterly report on the British economy published on Wednesday.

Despite that, the economy has gained momentum over the last few months, fiscal outturns have been better and financial markets appear to be sanguine about the uncertainty.

The UK economy has recently gained momentum with quarterly GDP growth expected at 0.7 percent in the third quarter after more or less stalling in the first, as a result of unusually bad and prolonged bad weather which reduced growth from 0.4 percent quarter on quarter at the end of 2017 to 0.1 percent over the first quarter of this year.

The uncertainty over Brexit meant that the NIESR unusually provided two forecasts based on a soft Brexit and a no-deal Brexit under which the UK reverts to trade under the World Trade Organization (WTO) rules in an orderly way after the end of the Article 50 period for Britain's EU exit, which is the end of March next year.

The NIESR's soft Brexit central forecast for GDP growth is broadly unchanged at 1.4 percent this year and slightly higher than next year at 1.9 percent (up from 1.7 percent in the previous quarterly report).

By contrast, under an orderly hard Brexit scenario, economic growth slows to just 0.3 percent in 2019, the NIESR forecast.

Amit Kara, head of UK macroeconomic research at the NIESR, told Xinhua in an exclusive interview that the British economy had turned round over the course of this year after a disastrous first quarter start.

"If you look at the past six months the economy has actually gained momentum. In the first quarter the economy had all but stagnated with growth of 0.1 percent quarter on quarter, it recovered to 0.4 percent in the second quarter and in our estimates it is likely to be around 0.7 percent in the third quarter," Kara said.

The British unemployment rate of 4.0 percent is at a low not seen since the mid-1980s and has been a feature of the British economic recovery in the 10 years since the financial crisis.

Wages however have not kept up, largely because of poor productivity growth.

Kara said: "The labor market data, particularly on the volume side has been quite impressive. We should also remember the other side of the equation and that is wages and real wages in particular -- they have performed abysmally since the financial crisis.

"We have seen an erosion of real wages. What we have seen is a remarkable recovery in employment but that has come alongside a very weak wage performance. In other words what we are doing is building more jobs but not as well paid."

Karea said the reason why wage growth seems to have not been so strong is in part because of poor productivity growth over the past 10 years.

"We don't fully understand why productivity has fallen so much, particularly in the UK, where compared with other G7 economies it has fallen by more," said Kara.

"One reason is that it is the type of thing that happens in the immediate aftermath of a financial crisis and these effects can last quite long, but it has been quite long now more than 10 years so we should start to see a recovery in productivity. So the assessment is that there is going to be a very gradual recovery improvement in productivity over time."

Kara said that under the government's economic model the British economy is likely to underperform the other G7 advanced economies.

Kara said Britain had outperformed other G7 nations until the Brexit referendum in 2016: "Since then it has been underperforming and it is likely to remain in the mid to lower end of the G7 performance."

But Kara said that the performance of the British economy in the coming year is "all conditional on Brexit, and what type of Brexit."

"Now if we did have a good Brexit the UK would probably be in the middle of that swathe of G7 economies. If we get a bad Brexit we are almost certainly going to be at the bottom of that swathe if not below the swathe. A lot hinges on Brexit," said Kara.