New year worries
Investment boost ‘will combat growing pressures’
Businesses see costs rising
Economists say government stimulus measures to encourage business investment will be key to combat the threats posed by the Omicron variant of Covid-19 and continuing cost and supply pressures.
The CBI has reduced its growth forecast from 8.2% this year to 6.9% and in 2022 from 6.1% to 5.1%.
It says short-term headwinds – including rising costs and shortages – have grown since the business group’s previous forecast in June. Longer-term challenges, notably persistently poor productivity, underline the need to boost business investment.
Another survey from KPMG is more pessimistic, predicting growth could more than halve next year if new restrictions are imposed to deal with the Omicron variant.
Tony Danker, CBI director-general, said: “The UK’s New Year resolution must be to give firms the confidence to go for growth. We should be raising our sights on the economy’s potential and seizing the moment.
“Government has key levers at its disposal to back business: pro-investment and pro-innovation regulation to help build new markets, a competitive tax regime that incentivises business investment across the board and new market-making interventions, for example on clean energy.
“Getting this mix right will pay dividends over the longer term, jumpstarting the UK’s flatlining productivity and set us on course for a brighter new year.”
KPMG said the potential disruption to the Christmas trading season from the new variant could be a huge blow to recovery hopes for hospitality and travel businesses, but the impact will depend on the extent to which new social distancing restrictions are introduced.