The Confederation of British Industry has predicted weaker economic performance next year.
The CBI has revised down its GDP growth forecast to 1.3 per cent, from 2 per cent in the previous forecast in May 2016.
The business group’s growth forecast in 2016 is unchanged at 2 per cent, reflecting a stronger first half of the year and resilience in the months since the European Union referendum.
But the CBI warned subsequent uncertainty is expected to hit business investment, which accounts for a significant element of the downgrade, as the UK moves towards a “Hard Brexit.”
Furthermore, the CBI predicted rising inflation is expected to affect household spending, further curbing economic growth.
The UK economy was on firm footing going into the referendum and it’s vital that we now seek to preserve these economic strengths.Rain Newton-SmithRain Newton-Smith, CBI chief economist, said the Autumn Statement presented a golden opportunity for the government to build on the Heathrow runway announcement by setting a clear path to drive the economy forward by stimulating investment and reducing uncertainty.
She said: “The UK economy was on firm footing going into the referendum and it’s vital that we now seek to preserve these economic strengths.
“While the pound remains sensitive to economic data and political rhetoric as the UK-EU negotiations develop, weaker sterling will lead to a welcome boost from net trade, although higher import costs are likely to push up prices.
“Retailers are particularly concerned about how consumers will react to rising inflation next year.
“Uncertainty means that business investment will remain flat next year before contracting in 2018, and downside risks to our forecasts are even more acute.”
TUC general secretary Frances O’Grady said: “A fall in growth would leave workers paying the price through fewer jobs and lower wages.
“The government must make responsible use of public investment to support business confidence and protect growth.
“Next month’s Autumn Statement should include new investment in infrastructure like roads, rail and homes. This would boost jobs and wages, and encourage businesses to invest more too.”
emma.hughes@ft.com
