By Daniel Hunter
The UK economy will grow faster than expected in 2015 and 2015, according to business lobby group, the CBI.
The organisation, which has around 190,000 British business members, raised its growth forecast from 2.4% in June to 2.6% for 2015 and expects growth of 2.8% in 2016, up from initial estimates of 2.5%.
The CBI said strong rises in consumer spending and investment growth is making the economic recovery more balanced. The recovery has previously been criticised for being too reliant on consumer spending.
Its report said better balance will help to fuel faster ‘twin engined’ growth in the UK economy.
The economic growth upgrade is due to a combination of factors, including signs of recovering productivity in the first half of this year feeding through to stronger wage growth.
Combined with continued low inflation from falling commodity prices, this gives a welcome boost to household spending. Furthermore, business investment is also likely to remain healthy, with our surveys indicating robust plans for capital spending.
The CBI said it expects the economy to grow by an average of 0.7% in each quarter until the end of 2016.
Although domestic growth looks solid, the CBI not expect any support from global demand. While immediate Eurozone risks appear to have receded compared with earlier in the year, a weaker outlook for China will weigh on global growth and a strengthening pound will eat into UK export competitiveness. Meanwhile, downside risks to emerging market growth appear to have intensified. As a result, net trade looks set to drag on GDP growth in both 2015 and 2016.
John Cridland, CBI Director-General, said: “We’re encouraged by the twin engined-growth of household spending, spurred by stronger wage increases and low inflation, buttressed by business investment.
“We’re also seeing tentative signs of productivity picking up.
“But the outlook on exports is somewhat muted: the strong Pound is hampering our competitiveness abroad and growth in the Eurozone, our biggest trading partner, and will remain subdued for the foreseeable future, particularly given renewed uncertainty.”