Business lobby forecasts broader recovery with rosy 2014 outlook
THE UK’S economic recovery will spread away from consumer spending, into trade and investment in the year ahead, according to a bullish forecast from the Confederation of British Industry (CBI).
Rejecting pessimistic views of the UK’s return to growth, the CBI projects 2.6 per cent GDP growth this year, boosted by a return of business investment, which is forecast to swell by 6.6 per cent during 2014, after a 3.7 per cent drop over the previous year.
The influential business group also forecasts export growth to rise from last year’s one per cent to 3.6 per cent this year and 4.7 per cent in 2015. Imports will continue to grow, but at a slower pace, cutting the UK’s current account deficit from 3.7 to 2.4 per cent of GDP in two years.
The group expects a sunny 2014 generally, with inflation falling to only 1.9 per cent while average weekly earnings grow by 2.8 per cent, meaning the first real wage increases since the recession.
“In our view this is not a debt-fuelled, housing bubble-led recovery – our forecast shows encouraging signs that business investment and net trade are starting to play their part,” said John Cridland, director general of the CBI.
However, he added that the political climate around the next general election posed a negative risk to the forecast: “This could be a real mood killer when business leaders are faced with making big investment decisions in the months ahead”.
Despite the forecast for a rapidly improving economy, the business group still suggests that the Bank of England will hold of hiking interest rates until the second half of next year.