CBI lowers UK growth forecasts

21 Sep 10
The economy will grow at a slower pace than previously expected in 2011 because of measures taken in the June emergency Budget, business leaders have said

By Jaimie Kaffash

22 September 2010

The economy will grow at a slower pace than previously expected in 2011 because of measures taken in the June emergency Budget, business leaders have said.

The CBI released its economic forecasts today. It predicts that the economy will grow by 1.6% this year – up from its 1.3% figure released before the emergency June Budget.

However, it has revised down its forecasts for the following year because of the fiscal consolidation measures announced by Chancellor George Osborne. It says that gross domestic product will grow by 2% in 2011, but this was lower than its June forecast of 2.5%. It adds that a double-dip recession was ‘unlikely’.

CBI director general Richard Lambert said: ‘The degree of uncertainty around the outlook remains high, but our view is that the UK’s tentative recovery will be sustained, albeit with weaker levels of growth.

‘The fragile nature of the recovery is why, in the forthcoming Spending Review, the government must focus its scarce resources on those areas which most galvanise growth, namely infrastructure and capital investment.’

The CBI’s forecast adds that inflation is likely to grow at a higher rate than 2% – the Bank of England’s target – because of the rise in VAT to 20%.

This came the day after the Office for National Statistics released its latest public finances figures. They showed that central government receipts were 6.3% higher in August 2010 than in August 2009.

Gemma Tetlow, senior research economist at the Institute for Fiscal Studies, said:  ‘Looking at spending and revenues over the whole of the current financial year suggests that tax revenues have grown more quickly so far than was forecast in the June Budget for the year as a whole, while current spending has only grown slightly more quickly.’

Did you enjoy this article?

AddToAny

Top