CBI forecast claims Britain on growth path
The CBI’s latest economic report notes that a recovery that began in the service sector has spread to manufacturing and construction – one of the areas most blighted by the recession.
But the business lobby group strikes a cautious note, warning of risks to the UK economy from a struggling Eurozone, structural changes in key emerging markets such as China and the likelihood of higher interest rates and reduced money printing.
John Cridland, the CBI’s director-general, said the UK was “set fair for growth with confidence returning to Britain’s entrepreneurs”.
Speaking on the eve of the organisation’s annual conference in London, Cridland said: “The recovery won’t be spectacular, just slow and steady, but appears more solid and better rooted.”
The CBI estimates the economy will grow by 2.4 per cent next year, up from its previous forecast of 2.3 per cent, rising to 2.6 per cent in 2015 – among the most optimistic of projections in recent weeks.
Official figures last month showed that Britain’s economy had expanded at its fastest pace in three years, adding to Chancellor George Osborne’s hopes for a sustained upturn.
The Office for National Statistics said GDP growth accelerated to 0.8 per cent in the third quarter, up from 0.7 per cent in the previous three-month period, and the highest increase since the second quarter of 2010.
Analysts are pencilling in GDP growth of 1.4 per cent for 2013 – in line with the CBI’s latest forecast, up from 1.2 per cent previously and despite an expected blip in growth during the closing months of the year.
Cridland said: “The recovery that started in the service sector has fanned out to manufacturing and construction, and is shaping up to be more broad-based. We’re also expecting business investment to pick up over the next two years and beyond, and net trade will begin to make a stronger contribution to growth.”
Stephen Gifford, the CBI’s director of economics, added: “Consumer spending will rise, underpinned by increased confidence, improved credit conditions and a gradual pick-up in real incomes.
“But risks remain, despite the relatively stable global environment of the past year, with financial markets moving to a new regulatory environment, the Eurozone continuing to evolve, emerging markets facing structural change and the challenge of unwinding unconventional monetary policies.”
Scottish business leaders have warned of a fragile recovery north of the Border and have called on the governments at both Holyrood and Westminster to bear down on the costs that affect firms in an effort to stimulate investment and boost exports.
Last week, the Fraser of Allander Institute at Strathclyde University said Scotland’s recovery from recession had been built on debt-fuelled spending by families and could not be sustained without a rise in exports and investment.
The CBI said UK export growth was expected to jump from 1.3 per cent this year to 5.1 per cent in 2015. It forecast an unemployment rate of 7.3 per cent in 2015, compared with 7.7 per cent in 2013, and said interest rates were likely to stay on hold in 2014 and 2015.