CBI forecasts ‘steady but subdued’ growth ahead

Economic growth will be “steady but subdued” over the next few years as the UK navigates Brexit, according to a leading business group.

Following stronger than expected growth in the last half of 2016, the CBI now forecasts 1.6% growth this year and 1.4% in 2018, slight improvements on the 1.3% and 1.1% previously forecast.

But it warned that business investment will fall back next year and household spending will also slow, as wage rises struggle to match inflation.

Growth in household spending is expected to be 1.7% this year – down from last year’s 2.8%. In 2018, it is forecast to be just 0.7%.

Wages are expected to grow by 2.4% this year and 2.8% next year – inflation is forecast to hover at around 2.7% both years.

Carolyn Fairbairn, CBI director general, said the pace of the economy would “shift down a gear”.

She added: “While the country’s exporters should emerge as a real catalyst of growth, rising inflation and stubbornly low wage growth mean that people are already starting to feel the pinch.

“Tighter purse strings mean slower household spending growth and uncertainty is likely to weigh on the minds of those making major business decisions.”

She said that, after a “frantic period” in Westminster, it was time for a “renewed focus on the economic fundamentals”.

“Above all, the new Government has the opportunity to signal loudly and clearly that Britain is a great place to do business, relentlessly focusing on investing in infrastructure, innovation and skills nationwide, while delivering a sensible and competitive tax and regulatory environment.”

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