Supply chain challenges will temper the UK’s GDP growth for at least six months, according to the latest economic forecast from the CBI.
The organisation released the news earlier this week, saying that it expected GDP growth for the UK to return to its pre-covid peak in the middle of next year. This was a marked downgrade, it admitted, from its previous prediction.
As growth recovers, the CBI said in a series of tweets, it expects this to be driven by an increase in household spending as consumers spend what they have saved during the pandemic, allied with strong growth in the labour market.
Overall, said the organisation, “The CBI is forecasting 6.9% growth in GDP over 2021 and 5.1% in 2022, revised down from 8.2% and 6.1% respectively. It should be noted that this largely reflects weaker than expected outturn data since our previous forecast. The business group’s forecast expects supply chain frictions to largely dissipate by the middle of next year.”
A major test of government
The organisation also put out an accompanying statement. There, Tony Danker, CBI director-general, said: “The challenge for January 1st is now very clear for the UK economy. Significant headwinds and rising costs of living threaten the extent of recovery and prospects for economic success. These hurdles for firms will provide a major test for Government – can they foster sustainable UK investment and growth?”
He added: “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. I know from speaking with firms of all sizes that they have an ambitious investment mindset, and are anxious to implement growth plans. But while intentions have thawed, we’re coming up to a cliff-edge in 2023.
“The super-deduction is a welcome catalyst, but a one-hit wonder isn’t enough to make up for four decades of underperforming business investment. We must build on its success with targeted measures encouraging the scale of investment we need, particularly in green technologies. A booster for growth is needed to protect and build on our recovery.”
Danker finished his very long statement by calling on businesses to also ‘step up and be part of the solution’ through investing in technology and skills.
Little mention was made of the Omicron variant in the statement, although it did acknowledge ‘concerns’.