The UK economy is forecast to grow at a “tepid” rate over the next couple of years, according to a recent analysis by the Confederation of British Industry (CBI).
GDP is forecast to grow at a rate of 1.5% in both 2017 and 2018, before dropping to 1.3% in 2019.
The business organisation expects quarterly GDP growth of 0.3% up to the end of 2019.
The CBI said that it expects CPI inflation to have peaked at 3% in October 2017, and should now begin to gradually lower down.
Regarding Bank of England interest rate rises, the industry body expects for an additional three rate rises since the most recent hike in November, each of 25 basis points – in Q3 2018, and in Q2 and Q3 2019.
Rain Newton-Smith, the CBI’s chief economist, said that household spending will “remain under pressure from squeezed real wages” and Brexit uncertainty will weigh on business investment. However, she added that there should be more support from net exports, “buoyed by the lower pound and a resurgent global economy.”
“After a timid 2017, UK economic growth is set to remain steady but sluggish, with less pep than we’ve seen over the past few years,” said Rain Newton-Smith.
“The lacklustre rates of growth that we’re expecting come against the backdrop of several years of persistently weak productivity, which is pushing down on the UK’s supply potential.
“The Government’s newly announced Industrial Strategy can help address this challenge and boost living standards. But the recent White Paper is just a first step – consistency and determination is needed to make this a long-lasting success.
“If the Industrial Strategy is to deliver better living standards, the UK needs a good Brexit. There is no point putting your foot to the floor on an Industrial Strategy while slow Brexit talks apply the brakes. It is already clear that Brexit is affecting business investment plans, and companies are having to prepare for a “no-deal” scenario. Therefore, it is vital that progress is made in negotiations with Brussels, particularly in providing more clarity around transitional arrangements, so we can start to shape our new relationship with the EU.
“Failure or deadlock would have an immediate impact on people’s lives – it’s time to put people and prosperity above political point scoring.”
Alpesh Paleja, the CBI’s principal economist, added: “The global economy is firing on all cylinders, with the upturn in growth becoming more broad-based. We expect this to continue in the near-term, which will provide a supportive backdrop for trade and economic growth in the UK.
“Coupled with a lower pound, now is a good time for businesses to look at new exporting opportunities across the world.”