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CBI predicts 'even slower growth' | CBI predicts 'even slower growth' |
(about 11 hours later) | |
Employers' organisation the CBI is warning of slower economic growth as households tighten their belts due to higher food and fuel prices. | Employers' organisation the CBI is warning of slower economic growth as households tighten their belts due to higher food and fuel prices. |
In its latest quarterly outlook, the CBI says the UK economy will grow at a slower than predicted rate of 1.8% this year, and by 1.7% in 2009. | In its latest quarterly outlook, the CBI says the UK economy will grow at a slower than predicted rate of 1.8% this year, and by 1.7% in 2009. |
This is gloomier than the chancellor's recent forecast of between 1.75% and 2.25% growth in 2008. | This is gloomier than the chancellor's recent forecast of between 1.75% and 2.25% growth in 2008. |
The CBI says the UK is experiencing "uncertain times". | The CBI says the UK is experiencing "uncertain times". |
"We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth," CBI director-general Richard Lambert said. | "We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth," CBI director-general Richard Lambert said. |
Outside the financial and property sectors, the mood of business is, however, nothing like as gloomy as you might guess from reading today's headlines Richard Lambert, CBI | Outside the financial and property sectors, the mood of business is, however, nothing like as gloomy as you might guess from reading today's headlines Richard Lambert, CBI |
The business organisation also predicts inflation to rise more than expected, driven by higher food and energy prices. | |
It expects the consumer prices index measure of inflation to peak at 3.2% in the second half of 2008. | It expects the consumer prices index measure of inflation to peak at 3.2% in the second half of 2008. |
But the CBI said slower growth should bring inflation down, meaning the Bank of England will be able to cut interest rates. | But the CBI said slower growth should bring inflation down, meaning the Bank of England will be able to cut interest rates. |
The CBI predicts the Bank of England will cut interest rates twice this year, with a further reduction in 2009 bringing interest rates down to 4.5%. | The CBI predicts the Bank of England will cut interest rates twice this year, with a further reduction in 2009 bringing interest rates down to 4.5%. |
Not all gloom | |
Economists have been predicting a more difficult time ahead, with the credit crisis, which has hit financial markets, making it more difficult for businesses and homebuyers to borrow money. | Economists have been predicting a more difficult time ahead, with the credit crisis, which has hit financial markets, making it more difficult for businesses and homebuyers to borrow money. |
But the CBI warns that although these factors mean the economy is in for a "bumpier ride", after two years of strong growth many businesses say conditions are still good. | But the CBI warns that although these factors mean the economy is in for a "bumpier ride", after two years of strong growth many businesses say conditions are still good. |
"Outside the financial and property sectors, the mood of business is, however, nothing like as gloomy as you might guess from reading today's headlines," Richard Lambert said. | "Outside the financial and property sectors, the mood of business is, however, nothing like as gloomy as you might guess from reading today's headlines," Richard Lambert said. |
And the UK manufacturing sector remains confident about the challenges ahead, according to the Engineering Employers Federation (EEF) business group. | |
It said that in 2007 UK manufacturers overcame a challenging economic environment thanks to its major restructuring efforts in recent years. | |
That, the group said, has enabled firms to survive in the face of increasing global competition. | |
A survey of 200 companies showed that an increasing focus on innovation, more sophisticated products and customer service was helping UK manufacturers to compete with low-cost rivals China and India - without having to cut prices. | |
"Instead of competing on price alone they are adopting a range of strategies to take advantage of emerging markets," the EEF said. | |
"While there are many other challenges on the horizon, manufacturers look well-placed to rise to them." | |
But, the EEF warned that "the credit crunch could have significant negative implications for UK manufacturing - if the underlying uncertainties continue for too long into 2008". |
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