UK economic growth is expected to remain solid, despite slower global momentum and financial market volatility, according to the CBI’s latest economic forecast.
The business group’s latest quarterly forecast predicts that the UK will remain among the fastest growing advanced economies this year, although the CBI has downgraded its GDP growth forecast for both 2016 to 2.3 per cent, from 2.6 per cent in November and 2017 – to 2.1 per cent, down from 2.4 per cent.
The modest adjustments for 2016 are driven chiefly by revisions to historical data, which show that momentum in the economy over 2015 was slightly less than previously thought, the CBI said.
Weak productivity and wage growth, leading to a slower rise in household spending, is also a factor.
But while the global economic outlook is weaker, particularly given concerns over China and its effect on emerging markets, the UK’s direct exposure is limited, the survey concluded.
Carolyn Fairbairn, CBI Director-General, said: “The UK is likely to remain among the fastest growing advanced economies with strong fundamentals, though our forecast recognises growing overseas risks.
“While there’s little current evidence of uncertainty negatively affecting business investment ahead of the EU referendum, this is a potential risk to the UK’s solid economic outlook, along with concerns over China and emerging markets.
“And despite domestic demand remaining healthy, it’s clear that increasing productivity remains a priority as a means of achieving sustainable wage growth.
“Overall, the UK economy is expected to see decent growth this year and in the next.
“It’s important to keep global economic challenges, such as recent stock market volatility, in perspective.”
While the UK’s labour market has been growing strongly, pay and productivity growth have been disappointing, according to the CBI’s study.