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UK employers group cuts growth outlook, urges Osborne to stick to austerity
[LONDON] The Confederation of British Industry, a leading employers group, cut its forecast for UK economic growth on Monday but said the government should not delay its push to fix the public finances.
The CBI predicted growth of 2.4 and 2.5 per cent in 2015 and 2016 respectively, down from forecasts of 2.7 and 2.6 per cent it made in February, echoing cuts to growth forecasts by other organisations including the Bank of England.
The group said the downgrade mostly reflected a sharp slowdown in Britain's official economic growth rate in the first three months of this year, which would probably prove a blip. "The recovery has built up a good head of steam," CBI Director-General John Cridland said. "Our members are feeling more upbeat than some of the recent official numbers suggest." Asked at a news conference whether the government should slow its plans to cut spending, he said CBI members thought that fixing the public finances remained the most important job. "We don't want the government to ease off on austerity. We want the government to continue to tackle the deficit in the public finances but to do so in an intelligent way," he said.
After five years of spending cuts, the government now needed to focus on "more imaginative" public service reforms including making savings by devolving powers to local authorities.
Finance minister George Osborne is due to announce new plans for tackling the deficit on July 8 after his Conservative Party won a national election last month.
Last week, the Organisation for Economic Co-operation and Development called on Mr Osborne to spread his budget tightening over a longer period to avoid the risk of hurting growth.
Mr Cridland also said a planned referendum on Britain's membership of the European Union was creating uncertainty for businesses, but there were no broad signs that they were putting investment plans on hold.
He struck a different note to another employers group, the EEF, which recently said the referendum should be held as quickly as possible to minimize the period of uncertainty. "There is a lot to do. Let's take the time to do that properly because the CBI is in favour of remaining in a reformed European Union and I want that reform to be meaningful. So no, I am not in favour of an early referendum," Mr Cridland said.
British Prime Minister David Cameron says he wants to negotiate reforms of the EU before holding the referendum by the end of 2017, or possibly earlier.