While warning against overly-pessimistic views of the current rate of growth, the CBI said that the UK is likely to experience relatively weak growth over the remains of 2011 and 2012.
CBI director-general John Cridland and chief economic advisor Ian McCafferty spoke to journalists at a press conference on Friday last week. They gave a detailed economic forecast, explaining the CBI’s opinion on how best to move the economy forwards to pre-recession growth.
Despite the Japanese Tsunami’s effect on automotive supply chains, the spiralling US public debt and current unease over the rate of inflation in China, the CBI maintains its prediction that the economy will grow by 1.3% this year – down from its prediction of 1.7% in May. The organisation predicts that GDP will grow by 2.2% in 2012 – unchanged from the May forecast.
According to a recent CBI report on industrial trends, those in the manufacturing sector have lost confidence in the market and are reappraising their business plans by reducing their workforce size and scrapping plans for investment.
Cridland argued that out of all recent events, the one that causes him most concern is the current unease in the Eurozone: “We’re starting to see supply chains recover in the wake of the Tsunami – the one to watch is the problems in Europe.”
“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 solid track growth,” he added.
The CBI expects exports to play a big role in boosting the economy on the road to recovery, while also expecting reliance on imports to gradually decrease.
McCafferty said: “Economic conditions will be very tough for the rest of this year as household budgets continue to be squeezed by a combination of inflation and weak wage growth. But conditions will be a little brighter in 2012 as inflation eases back and take home pay improves.”