CBI warns 'gloomier' global outlook will hit UK growth


The country's biggest business group has warned that a "gloomier" global outlook will hit economic growth in the UK next year.

The CBI has announced a "modest" downgrade in its forecast for this year, saying it expects the economy to grow by 2.4%, compared to an earlier prediction of 2.6%, and by 2.6% next year, down from 2.8%.

The group also unveiled its first forecast for 2017, saying it expected solid growth at 2.4%, with a gradual rise in inflation easing household spending.

CBI director general John Cridland said the UK economy was showing "resilience" in the face of "turbulent times" overseas.

Average earnings are expected to increase by around 3% up to 2017, "comfortably outpacing" inflation, said Mr Cridland.

Speaking ahead of the CBI's annual conference in London today, Mr Cridland said: "Manufacturers are enduring tougher conditions, as a persistently strong pound is hamstringing our export competitiveness, alongside dampened global growth. But our domestic story is strong and overall we are now in a phase of stable but solid economic growth.

"Mark Carney, the Bank of England Governor, has already signalled that an interest rate rise will be limited and gradual when it comes. We know that businesses are prepared for this.

"Overall we must continue to put solid foundations in place to support the economy. That means ploughing ahead with critical infrastructure decisions, such as aviation capacity, maintaining flexibility in our labour market and keeping an open door to businesses and talent from abroad that create jobs and boost our economy.

"Tackling these issues is just as important for businesses as securing reform in the European Union and is crucial for the UK to meet its global ambition in the face of stiff competition."

The CBI said it expected a slower pace of jobs growth as productivity improves, with unemployment likely to level out at 5.1% in 2017.

CBI president Paul Drechsler will tell the conference that the Government should "get on" with giving the go-ahead for airport expansion in the South East.

The Airports Commission published a report in July backing a third Heathrow runway, saying it will add £147 billion in economic growth and 70,000 jobs by 2050.

A government decision is expected by the end of the year, but many businesses are frustrated at the lack of action.

Mr Drechsler will say he welcomes the creation of a National Infrastructure Commission, adding: "The Commission is a chance to end the cycle of politicisation and procrastination that has plagued British infrastructure for decades. However, we must not duck infrastructure decisions which must be made right now.

"On airport capacity, we need strong political leadership and decisive action from Government. Britain needs that new runway, so let's get it built."

On Europe, Mr Drechsler will say that most CBI members wanted to remain in a reformed EU.

He will tell the 1,000 delegates at the London event: "The majority of our members think that, on balance, the advantages of EU membership outweigh the disadvantages.

"And when we see the reforms the Prime Minister achieves and expects to achieve over time we will ask you again for your views.

"Of course we know that Europe is far from perfect. New regulation must be a last resort, not a first response.

"And further integration in the Eurozone isn't something the UK wants to be part of."