The UK economy is expected to continue to grow – but at a slower rate – through 2016 and 2017, and there are signs that global economic risks, including uncertainty ahead of the EU referendum, are starting to weigh on investment plans, according to the latest CBI economic forecast.
The business group’s latest quarterly forecast predicts that the UK will see 2.0 per cent GDP growth in both 2016 and 2017, both of which are downgrades from its last forecast in February (2016 – 2.3 per cent, 2017 – 2.1 per cent).
Growth is again expected to be driven by household spending and investment, but the deterioration in the global economic outlook, including weaker prospects for China and other emerging markets, continue to represent major challenges.
CBI director general Carolyn Fairbairn said: "We expect the UK’s growth path to continue but it is likely to be at a slower rate than previously thought.
"A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest.
"At present, the economic signals are mixed – we are in an unusually uncertain period."
Household spending will remain a major driver of economic growth, though it is expected to ease (2016 – 2.5 per cent, 2017 – 1.5 per cent). This is due, in part, to rising inflation over the course of the next two years. Household spending will account for around 80 per cent of growth in 2016, and roughly half in 2017.Meanwhile, footfall in April was 2.4 per cent down on a year ago, slightly ahead of the 2.7 per cent fall in March. This further decline is consistent with the flat sales growth we saw in the most recent BRC-KPMG Retail Sales Monitor and slowing economic growth expected by major forecasters.
BRC chief executive Helen Dickinson said: "Today’s figures will make sobering reading for retailers battling to attract customers into their shops. In all but retail parks, footfall has fallen again. The High Street has seen the deepest decline in footfall since February 2014 at 4.7 per cent, putting April well below the three-month average. This also coincides with the first rise in town centre shop vacancies for 15 months."