The Confederation of British Industry (CBI) expects the UK’s economy to continue to grow slower than it should for the next two years.
According to the CBI’s latest economic forecast, GDP growth for over the next two years is set to remain modest at 1.3 per cent in 2019 and 1.2 per cent in 2020. For 2021, the CBI forecasts a somewhat brighter outlook, with growth picking up to 1.8 per cent.
This is based on the assumption that the UK exits the EU by 31 January 2020 and has clear line of sight to an ambitious trade deal.
The main risk to the outlook remains continued Brexit uncertainty, particularly the threat of a No Deal Brexit. On the global front, a further escalation in US-China trade tensions would deliver further hits to world growth and trade, with knock-on impact on the UK economy.
“Business continues to show remarkable resilience after more than three years of crippling uncertainty,” said Rain Newton-Smith, CBI Chief Economist. “In that time, firms have continued to go about their day jobs, playing a vital part in driving economic growth. But they’ve been beset by headwinds. Alongside perennial Brexit uncertainty, they are also contending with softer global demand.
“Should these dual headwinds subside, we expect a gradual pick-up in activity. But the bigger picture is one of fairly modest growth over the next couple of years – growth that should be far better, given the UK’s relative strengths.
Business investment is expected to grow modestly over 2020 (0.3 per cent), as Brexit uncertainty gradually wanes under the CBI’s assumption that the UK begins a smooth transition to a new relationship with the EU. It picks up somewhat in 2021 (2.2 per cent), as clarity over the future UK-EU relationship is more forthcoming. In the case of more prolonged Brexit uncertainty, the CBI expects business investment to be weaker.
Article published 3rd December 2019