CBI cuts UK growth forecasts
By Abigail Townsend
Date: Monday 06 Dec 2021
(Sharecast News) - The Confederation of British Industry has cut its UK economic growth forecasts for this year and the next as global supply issues continue to weigh heavily.
The business organisation is forecasting 6.9% GDP growth for this year and 5.1% in 2022. That compares to a previous forecast for 8.2% and 6.1% respectively.
The CBI said the revision "largely reflects weaker than expected outturn data" since its last forecast, with supply chain frictions now not expected to ease until the middle of next year.
Household spending is set to drive GDP, with the CBI expecting it to generate 90% of growth in 2022 and two-thirds in 2023, supported by improvements in real income and households spending savings they accumulated during the pandemic.
But rising costs will likely offset some of that, with inflation predicted to peak at 5.2% in April and remain above the Bank of England's 2% target until spring 2023, the CBI said.
Tom Danker, CBI director-general, said: "Significant headwinds and rising costs of living threaten the extend of recovery and prospects for economic success.
"The UK's New Year's resolution must be to give firms the confidence to go for growth. The super-deduction is a welcome catalyst, but a one-hit wonder isn't enough to make up for four decades of underperforming business investment."
The so-called super-deduction was introduced to encourage capital spending, allowing companies to claim back up to 25p for every pound invested in machinery and equipment for two years from 1 April 2021.
The CBI said business investment is expected to grow by 8.2% over 2022 before falling back from mid-2023 when the tax break comes to and end and a rise in corporation tax kicks in.
Rain Newton-Smith, CBI chief economist, added: "We expect a pretty firm recovery ahead, though understandably the emergence of omicron poses another downside risk to our forecast."
The CBI estimates household spending will rise by 7.6% in 2022 and 3.1% in 2023, with jobless numbers ticking higher at the end of this year before falling back steadily.
Globally, the body is forecasting GDP growth of 5.7% in 2021, 4.7% in 2022 and 3.8% in 2023.
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