Britain’s economy will expand faster than previously expected in the next year and a half, but the lack of government focus on economic issues threatens to see growth “shift down a gear”, according to one of Britain’s biggest industry groups.
The UK economy will expand by 1.6 per cent this year, before slowing to 1.4 per cent GDP growth in 2018, according to the Confederation of British Industry (CBI).
Stronger momentum from the end of last year and an uptick in the contribution from exports to growth prompted an upgrade to forecasts compared to November, when the CBI’s economists predicted a sharper slowdown to 1.3 per cent this year.
However, with the Brexit negotiations starting yesterday led by a minority government, the CBI has stepped up its calls for the economy and business to feature more prominently in government’s priorities.
Carolyn Fairbairn, CBI director-general, said: “It really is time for politicians to focus on the economic fundamentals.”
Business groups have seized on the chance to assert themselves after the General Election in which Theresa May’s Conservatives lost their mandate, with City bosses sensing an opportunity to push for a softer Brexit, with closer trade links and fewer limits on immigration.
The shock election result at the start of the month offers an “opportunity” for “the economy to be back on centre stage” in the negotiations, Fairbairn said.
The CBI’s forecasts predict the economy will pick up pace slightly over the course of the year, after a weak first quarter of 0.2 per cent growth.
However, rising inflation and consequent slower consumer spending will weigh on growth prospects.
“It will feel very different for households,” said Rain Newton-Smith, CBI chief economist. “Average pay won’t keep pace with that inflation.”
A bright spot will be offered by UK companies selling abroad, who have been boosted by the weaker pound. Exporters will be the largest contributor to growth over the next two years, with net trade accounting for 30 per cent of GDP expansion, according to the CBI’s forecasts.