Surveys point to resilience

CBI downgrades UK growth as Scottish private sector expands

John Cridland freeThe CBI has downgraded its forecast for the UK economy although it says it remains resilient in the face of wider fears for global growth.

In its quarterly forecast it now says its expects growth this year of 2.4%, down from 2.6%. Next year it sees growth of 2.6%, down from 2.8%. It issued its first forecast of 2.4% growth for 2017 with a gradual rise in inflation easing household spending.

It now believes that an interest rate rise is likelier in the second quarter of next year, rather than in the first three months  as predicted in the business group’s previous forecast.

John Cridland, the outgoing CBI Director-General, said:The UK economy’s continued strong performance is a clear sign of its resilience in the face of turbulent times overseas.

“Manufacturers are enduring tougher conditions, as a persistently strong pound is hamstringing our export competitiveness, alongside dampened global growth. But our domestic story is strong and overall we are now in a phase of stable but solid economic growth.

“Mark Carney, the Bank of England Governor, has already signalled that an interest rate rise will be limited and gradual when it comes. We know that businesses are prepared for this.”

The figures coincide with the latest data on the Scottish economy from Bank of Scotland and the accountants BDO. Bank of Scotland says the private sector has returned to growth with a growth in jobs. However, it contradicts earlier surveys by saying services grew strongly.

Donald MacRae, Chief Economist at Bank of Scotland, said: “Output increased modestly in services and marginally in manufacturing. These results confirm the summer slowdown in the Scottish economy has been arrested giving slow growth rather than no growth going into the third quarter of the year.”

BDO’s Business Trends Monitor says the Government’s plans to rebalance the UK economy are increasingly at risk.

Martin Gill of BDO Scotland says: “The government’s plans to encourage a more balanced economy are clearly right, but need to be accompanied by far more action. For instance, incentives to invest and plan for future success should be increased significantly.”

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