CBI slashes growth forecast for next year blaming impact of Brexit

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at 2016.11.02
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CBI slashes growth forecast for next year blaming impact of Brexit

Wednesday, November 2nd, 2016 12:58am

UK growth is expected to slow sharply next year as businesses and consumers hold back spending in the wake of the Brexit vote, according to the CBI.

The business group has slashed its forecast for economic growth in 2017 from 2% to 1.3%.

Its outlook for gross domestic product (GDP) expansion this year remains unchanged at 2% after a strong first half of the year and robust performance even after the Leave vote.

But the CBI said that uncertainty will hit business investment in the months to come – accounting for a significant part of its downgrade.

Meanwhile, rising inflation – which looks set to be driven higher by the fall in the pound after the Brexit vote – will squeeze household spending, it predicted.

The CBI said the Chancellor’s Autumn Statement later this month would be a “golden opportunity” to help the economy by stimulating investment – building on the recent Heathrow runway announcement – and reducing uncertainty.

CBI chief economist Rain Newton-Smith said: “Certainty and stability, vital ingredients that allow businesses to invest and create jobs across the UK, have been absent since the vote to leave the EU.”

She said that business leaders would look to the Chancellor to incentivise investment with the Autumn Statement. 

The new forecast comes a day before the Bank of England publishes its quarterly inflation report, giving its current outlook for the UK economy as well as announcing its latest interest rate decision.

Official figures last week showed GDP increased by 0.5% in the third quarter – defying expectations for growth to grind to a halt after the Brexit vote.

But the CBI predicts that the fallout will start to take full effect next year.

It sees the weak pound – which makes imported goods more expensive – sending inflation above the Bank of England’s 2% target in the second quarter of 2017, holding back consumer spending growth.

The outlook chimes with a warning from the British Retail Consortium (BRC) that the fall in sterling since the referendum will stoke inflation.

Its latest shop price index showed prices continuing to turn lower, falling 1.7% in October compared to a year ago.

But it said a return to inflation was inevitable with prices expected to turn higher in the first quarter of 2017.

Sky News (c) Sky News 2016: CBI slashes growth forecast for next year blaming impact of Brexit

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Published at Wed, 02 Nov 2016 01:02:17 +0000

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