The Confederation of British Industry (CBI) has cut its growth forecast for the UK economy and has warned of further risks posed by the end of the Greek crisis and uncertainty about the EU referendum.
CBI predicts growth of 2.4% and 2.5% in 2015 and 2016. This is down from 2.7% and 2.6%, which were the forecasts made in February. The decision to lower the expected growth is in line with other organisations that have revised figures, one being the Bank of England who recently revised its growth forecasts to be lower.
The blame was pointed towards the weaker-than-expected growth in the first quarter and the 0.3% expansion marked the UK’s weakest growth since the end of 2012. The CBI stated that if productivity continues to be weak, it could pose a threat to the UK economy. It also warned that the uncertainty over the EU referendum’s outcome meant that investment spending could also be delayed.
It is possible that this may not be a trend but a blip because it mostly reflects a sharp slowdown in Britain’s official economic growth rate in the first three months of this year and the employers’ group wants the government to stick to its plan to fix the public finances.
John Cridland, who is the CBI director-general, continues to feel confident that the UK economic recovery was on track and as a result of this, UK employers were feeling positive.
However, the CBI forecast came as the accountancy firm and services group BDO said that UK manufacturing firms’ confidence had dropped at its highest rate in two years. In addition to this, its monthly manufacturing optimism index, which is based on the UK’s main business surveys, had also seen a four-point drop. This is its biggest drop since March 2013. Low oil and gas prices had curbed investment in the sector and therefore slowed orders for manufacturing firms and a combination of the strong pound and a weak Eurozone hit exports, said BDO.