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CBI revises UK economic growth forecast

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by Kay Mitchell

Employers’ group, the Confederation of British Industry (CBI), has today revised down its economic growth forecast for the UK.

The group said stubbornly high inflation and public sector job cuts will slow the economic recovery with growth falling to just 0.2% in the first quarter of 2011.

However, it does not expect the UK fall back into recession and expects growth to rise to 0.4% in the second quarter of 2011.

Meanwhile, growth should pick up to 0.5% in the third quarter, giving a 2% annual growth rate for the 2011 year.

It is also estimating growth will be 2.4% for the 2012 year.

It attributed the revisions for the 2011 year to public sector job cuts, which are now gathering pace, and the forthcoming VAT hike – due to rise from 17.5% to 20% in January.

The VAT rise will keep inflation higher, said the CBI, which will ultimately slow economic growth.

Official figures showed the UK economy grew 0.8% between July and September but this was slower than the 1.2% growth experienced in the April to June period.

Meanwhile, consumer price inflation (CPI) will remain above the Bank of England’s 2% target for the whole of next year, the CBI said, and will end the 2012 year at the 2.4% mark – much closer to target.

Inflation has been above the central bank’s target for 12 months now and the latest figures show CPI at 3.3%.

In the meantime, the organisation expects unemployment to rise next year – peaking at 2.6 million at the end of 2011. Unemployment currently stands at 2.5 million, with the rate at 7.9%.

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News posted: December 20, 2010

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