CBI upgrades 2015 UK growth forecast

The Confederation of British Industry (CBI) has revised its forecast upwards for economic growth in the UK this year.

The business lobby group now expects the UK economy to expand by 2.7 per cent in 2015, compared with its forecast in November of 2.5 per cent.

Continued low inflation and improvements in employment have been cited as the reasons for the increase; but the CBI also warned of “volatility” in the eurozone, with events in Greece and Ukraine regarded as risks to growth.

The CBI believes future growth will be driven by increased household spending – due to low inflation boosting pay – as well as wage growth.

The organisation also expected firms to have more to spend due to the sharp drop in oil prices which lowered operating costs, leaving more space for investment, although North Sea companies had no doubt been hurt by the oil price decline.

Katja Hall, deputy director-general, CBI, said: “While lower oil prices are keeping costs down for businesses and consumers, the North Sea oil companies are suffering, harming jobs and investment in the industry.

“Now is not the time for complacency, but falling unemployment coupled with improving wage growth and rock bottom inflation should mean that people see more money in their pockets.”

The CBI said markets are currently anticipating an interest rate increase in early 2016, with growth currently underpinned by rock-bottom interest rates.

Gross domestic product (GDP), which includes all the services and goods produced within a year, expanded by 2.6 per cent in 2014; which was faster than any other European economy.

A Treasury spokesman added: “This is welcome news for households and families, but the job is not yet done so we must keep working through the plan that is delivering economic security in an uncertain world economy.”


Image: The CBI

Date published 16 Feb 2015 | Last updated 16 Feb 2015