CBI cuts economic growth forecast over Brexit uncertainty, protectionist policies
The Confederation of British Industry has cut its economic growth predictions for the UK for this year and next due to Brexit uncertainty and protectionist rhetoric crimping investment.
In a new report published on Friday, the business group revealed it now forecasts GDP growth of 1.4% for 2018 and 1.3% in 2019. The forecast for 2018 is slightly lower, down from 1.5% growth expected back in December 2017 owing to the poor GDP performance in the first quarter.
This downgrade comes as UK businesses concerns grow over the little advance in Brexit negotiations and the lack reassurance that they will be able to adapt to the divorce with a transition deal.
Consumers are also feeling wary of spending as living standards continue to be dogged by weak productivity.
The CBI recommends the UK government and firms to focus on improving productivity and take advantage of opportunities abroad. They also recommend following in the steps of those businesses that achieve efficiencies and raise productivity by using AI and digitalisation.
Rain Newton-Smith, CBI chief economist, said: “Snow capped a sluggish start to 2018 for the UK economy, and there’s no disguising that Britain now finds itself in the ‘slow lane’ for growth.
“Firms must work with Government to nurture a pro-enterprise environment to drive growth and create wealth. And there is much within the UK’s control that can be acted on now,” he added.
She also referenced the approval of the construction of a third runway in Heathrow airport that could be beneficial for the UK economy even though it faces strong opposition.
“Creating extra capacity at Heathrow will allow firms to tap into global opportunities more seamlessly. Building skills fit for the 21st century is essential too, so getting new technical education routes right really matters,” she said.
The CBI said that since the Bank of England decided to maintain the interest rates in May, the business group expects three rate rises of 25 basis points each (in Q3 2018, Q1 2019 and Q4 2019).
Alpesh Paleja, CBI principal economist, said: “With the pound low and the global economy firing ahead, there’s never been a better time for UK firms to get export ready. Looking ahead, we expect more of a lift to the economy from net trade, marking a shift in the composition of economic growth.