UK firms expect moderation in rapid economic growth

Chris Papadopoullos
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UK firms’ expectations of economic growth have seen a decline with weak global growth and low productivity hitting sentiment.

Reductions in growth expectations have occurred in the manufacturing, distribution, and consumer, business and professional service sectors, accord­ing to survey data published today by the Confederation of British Industry (CBI).

The CBI is forecasting 0.6 to 0.7 per cent growth over the rest of the year.

Results from the Office for National Statistics showed last week that growth in the third quarter was 0.7 per cent. The figure was less than the second quarter’s 0.9 per cent growth.

UK growth is still very robust compared with other developed nations.

Expectations of growth over the rest of year have moderated, implying firms are not expecting a return to the strong expansion seen in the second quarter any time soon.

The net balance (per cent of firms responding positively minus the per cent responding negatively) of firms expecting stronger growth over the next three months was 25 which marks a steep reduction from August’s 38.

“Faced with huge political and economic uncertainties, ranging from a weak Eurozone, a deteriorating outlook for emerging markets and an increasingly febrile geopolitical climate, it’s little wonder that firms have been gradually scaling back their predictions for growth,” said economist Rain Newton-Smith from the CBI.

Further research released today by accountants PricewaterhouseCoopers (PwC) suggests weak productivity growth may hinder growth.

The firm believes employers have been increasing their headcount too quickly while revenue has failed to grow as fast.

“Too many organisations are simply following the pack and recruiting because everyone else is, rather than because they need to. This will ultimately stifle workforce productivity levels,” Anthony Bruce, HR and workforce analytics leader at PwC.

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