UK firms can ride out storm, says CBI's director general
BUSINESS leaders today backed Britain’s economy to ride out “growing overseas risks” despite further weakness in factory output denting hopes for a more balanced recovery.
The CBI has lowered its growth forecast for this year from 2.6 per cent to 2.3 per cent
CBI director general Carolyn Fairbairn said it was important to keep recent stock market turbulence “in perspective” as the employers’ organisation predicted the UK would remain among the fastest growing advanced economies in 2016.
The CBI has lowered its growth forecast for this year from 2.6 per cent to 2.3 per cent and from 2.4 per cent to 2.1 per cent for 2017, taking into account a slower than expected rate of expansion last year as well as weak productivity and wage growth.
Fairbairn acknowledged uncertainty over a possible Brexit, as well as concerns over China and emerging markets, could threaten a “solid” economic outlook driven by healthy domestic demand.
Carolyn Fairbairn says it's important to keep global economic challenges in perspective
The UK economy is expected to see decent growth this year and next
But she added: “Overall, the UK economy is expected to see decent growth this year and next. It is important to keep global economic challenges, such as recent stock market volatility, in perspective.”
CBI director for economics Rain Newton-Smith added: “It is important to remember that the UK has largely remained resilient amid recent global turbulence. We have a sound economic footing at home driven by strong job creation and business investment coupled with low inflation supporting household spending.”
Uncertainty over a possible Brexit could threaten a solid economic outlook
The reliance on the dominant services industries to maintain the recovery was highlighted by official figures showing Britain’s industrial output suffered its sharpest monthly drop for three years in December.
It fell by 1.1 per cent from the previous month as manufacturing output declined by 0.2 per cent and as the low oil price hit North Sea producers.
Quarterly output is estimated to have dropped 0.5 per cent from the previous three months, compared with the 0.2 per cent forecast.
Concerns over China and emerging markets could also affect the economy
Sam Alderson, economist with the Centre for Economics and Business Research, said: “There is little to suggest that either manufacturing or the wider production sector will see a notable recovery in the coming 12 months.
“The pound remains relatively strong, adding to the headwinds from slower global growth, and a balancing of the UK economy looks unlikely to happen anytime soon.”