UK economy to remain slack in 2018, says CBI

Economic growth in the UK this year has been “timid” and will stay “steady but sluggish” in 2018, the CBI has said.

The business group says growth will be “tepid” amid Brexit uncertainty, while household spending will remain under pressure from squeezed wages.

The CBI expects subdued quarterly GDP growth of 0.3% until the end of 2019 – almost half the growth rate since 2013.

The body expects GDP to expand by 1.5% in both 2017 and next year, and fall to 1.3% in 2019.

It also argues that CPI inflation peaked at 3% in October, and should now ease gradually.

“After a timid 2017, UK economic growth is set to remain steady but sluggish, with less pep than we’ve seen over the past few years,” said Rain Newton-Smith, the CBI’s chief economist.

While domestic demand would remain soft, she said there were encouraging economic signs, including more support from exports, which have been buoyed by the lower pound and a resurgent global economy.

“The lacklustre rates of growth that we’re expecting come against the backdrop of several years of persistently weak productivity, which is pushing down on the UK’s supply potential,” added Ms Newton-Smith.

“The government’s newly announced Industrial Strategy can help address this challenge and boost living standards, but the recent White Paper is just a first step – consistency and determination is needed to make this a long-lasting success.”

The CBI said it was clear Brexit was affecting business investment plans, with companies having to prepare for a “no-deal” scenario.

‘Exporting opportunities’

Alpesh Paleja, the CBI’s principal economist, added: “The global economy is firing on all cylinders, with the upturn in growth becoming more broad-based. We expect this to continue in the near-term, which will provide a supportive backdrop for trade and economic growth in the UK.

“Coupled with a lower pound, now is a good time for businesses to look at new exporting opportunities across the world.”

It comes as a study by manufacturers’ organisation the EEF found that demand for goods from European markets in particular was compensating for a weaker position in the UK.

Lee Hopley, EEF chief economist, said: “Stronger global growth has cemented the foundations for growth in manufacturing this year, but the sector’s contribution to the UK economy has been greater than most expected.”

She added: “There is some confidence that this momentum will carry into 2018, but as we head towards the Brexit end game we need manufacturing to produce the same trick.”

source: Reuters