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CBI cuts UK growth forecast


Business lobby group expects ‘sluggish’ expansion

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The Confederation of British Industry (CBI) cut its growth forecast on Monday for the UK economy this year from 1.7 percent to 1.3 percent due to an erosion of business confidence and a squeeze on household incomes.

Expansion is likely to be “sluggish” throughout this year and next, the employer’s lobby group said, with UK GDP expected to grow by 2.2 percent in 2012 in line with predictions made in May.  

“The global economy has slowed in the face of several shocks including the Japanese tsunami and soaring commodity prices,” said John Cridland, CBI director-general.

“These factors have combined with political uncertainties around the euro zone sovereign debt crisis, the wrangling in Congress over the US debt ceiling and the policy tightening in China, to erode confidence and soften activity.”

The CBI said it expected interest rates to be maintained by the Bank of England at their current low of 0.5 percent for the rest of this year but to reach 1.5 percent by the end of 2012.

It said unemployment will rise to 2.5 million towards the end of 2011 and should end the following year slightly down at 2.41 million.

Sovereign debt issues in the euro zone and in the US are hindering investment confidence among British companies but growth in this context is tipped to reach the “historically strong” level of 9.3 percent in 2012.

“It may be a lacklustre recovery, but with solid net trade contributions and the positive impact of business investment, the UK will remain on a growth track,” Cridland said.

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CBI cuts UK growth forecast
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