CBI upgrades growth forecast

The CBI today upgraded its forecast for GDP growth as the recovery continues to take hold. But it warned politicians of all shades to put incentivising business investment ahead of short-term electioneering.

The UK’s leading business group is forecasting GDP growth of 3.0 per cent in 2014, up from the previous forecast of 2.6 per cent, and 2.7 per cent in 2015, up from 2.5 per cent.

The economy grew by 0.8 per cent in the first quarter of 2014 and quarter-on-quarter GDP growth of 0.7 per cent is expected for the rest of this year and next.

Yet while economic signs are encouraging, the CBI said political uncertainty remains a major risk to the recovery. Setting out its headline priorities one year out from the general election, the CBI urged politicians to stick with what’s working and tackle the UK’s long-term economic challenges.

Among the measures the CBI is calling for are committing to eliminate the budget deficit, scrapping the immigration target and raising the tier 2 visa cap, ensuring big infrastructure decisions are taken with a long-term strategic view and avoiding damaging market interventions.

John Cridland, CBI Director-General, said: “The UK now has more stable economic foundations, and political risks must not jeopardise this.

“The recovery is advancing after a strong performance in the first quarter of 2014. Prospects are bright and we expect the recovery to broaden out this year, with greater support from business investment in particular.

“Businesses recognise the realities of election time but want all parties to ensure their policies make a positive difference. Politicians must be wary of the risk of headline-grabbing policies that weaken investment, opportunity and jobs.”

While the recovery in 2013 was largely driven by consumer spending, there are now encouraging signs of growth becoming more broad-based. Business investment is recovering, and in the final quarter of 2013 it was 8.7 per cent above its level a year ago. Uncertainty over demand conditions has been falling and business confidence has been improving. The CBI expects business investment growth of 8.3 per cent this year and 9.1 per cent next year.