Economic growth is expected to rise in 2013 and 2014 and while rebalancing away from consumer spending is taking time, the CBI forecasts business investment next year will be at its highest level since 2007.
The CBI is forecasting GDP growth of 1.2% in 2013, up from 1.0% in its May forecast, after a better than expected second quarter and signs of a pick-up in confidence across a broad range of sectors, including services, construction and manufacturing.
Separate surveys by EEF with NatWest, and Barclays, show that manufacturers investment plans are very positive, despite caution over the outlook for exports.
In 2014, is forecasting 2.3% GDP growth up from 2.0% in May, as disposable income increases and business and housing investment support domestic demand.
A return to growth in the euro area and broader global recovery will give a positive boost to exports, but imports will also grow as the UK’s domestic situation improves, so the trade contribution to growth will remain small.
John Cridland, CBI director-general, said “The economy has started to gain momentum and confidence is picking up, but it’s still early days.
“We need to see a full-blown rebalancing of our economy, with stronger business investment and trade before we can call a sustainable recovery. We hope that will begin to emerge next year, as the Eurozone starts growing again.”
Business investment and exports are forecast to strengthen as the global economy picks up and the Eurozone returns to growth, confidence rises, and credit conditions continue to improve.
Investment is forecast to grow by 7.3% in 2014 from -2.8% in 2013. Export growth is expected to increase from 0.7% in 2013 to 4.9% in 2014, but the net contribution of trade to GDP growth will remain muted as domestic demand boosts import growth from -0.8% in 2013 to 4.4% in 2014.
The CBI expects interest rates to remain on hold beyond 2014.
Stephen Gifford, CBI director of economics, said: “As the Eurozone returns to growth… we should see a gradual increase in business investment and UK trade.
“But despite a relatively stable global environment over the last year, risks remain as financial markets move to a new regulatory environment and the Eurozone continues to evolve.”
The Manufacturer is hosting two events in London on October 16 to assist companies to innovate and increase exports.
Export Connect is the launch event in The Manufacturer magazine’s Accelerated Growth Series, new for 2013. – See more at: www.themanufacturer.com/eventsite/export2013/
The Innovation in Manufacturing conference is part of The Manufacturer’s Future Factory series and will provide delegates with the knowledge and expertise they need to nurture innovation in the workplace and find more efficient ways of developing new, more sophisticated products. – See more at: www.themanufacturer.com/eventsite/innovation2013/