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UK business lobby cuts growth forecast, wage and retail outlook soft
[LONDON] The Confederation of British Industry cut its economic growth forecasts, citing the approach of the European Union referendum, and retailers and pay experts also pointed to a subdued outlook in other reports published on Monday.
The CBI, which has stressed the economic benefits of staying in the EU, said worries about the outcome of the June 23 vote were adding to a broader economic slowdown. "A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms' plans to invest," CBI director-general Carolyn Fairbairn said.
The CBI said it now expected Britain's economy to grow by 2 per cent a year this year and next, down from forecasts of 2.3 per cent and 2.1 per cent made in February and below the long-run average. It based its forecasts on an assumption that Britain would stay in the EU.
The Bank of England cut its growth forecasts on Thursday to 2.0 per cent growth this year and 2.3 per cent in 2017 and said the economy would slow more sharply, and possibly even go into a short recession, if Britain votes to leave.
The BoE wants to see faster wage growth before it starts to raise interest rates from their record lows of the last seven years, something most economists expect to happen only in 2017.
Britain's Chartered Institute for Personnel and Development (CIPD) said businesses expected to award average pay rises of 1.7 per cent over the next 12 months, below the long-run average though up from February's two-year low of 1.2 per cent. "The UK is now in its eighth year of productivity 'go slow'which continues to limit the scope for employers to pay more and ... this survey provides no indication of this situation changing any time soon," CIPD chief economist Mark Beatson said.
In a third report published on Monday, the British Retail Consortium said the number of shoppers on the high street fell by 4.7 per cent compared to a year earlier, the steepest decline in over two years. Cold weather was a factor.
"The rise in unemployment and economic uncertainty in this pre-EU referendum period has undoubtedly adversely impacted consumer activity," said Diane Wehrle, a director at market research company Springboard, which provided data for the BRC.