UK can meet Truss's ambitious growth target - despite current 'stagflation', says CBI boss Tony Danker

The director-general of the CBI has said the Government’s ambitious 2.5 per cent target for annual growth is achievable despite him currently believing the economy is currently already in a period of ‘stagflation’.

Speaking to The Yorkshire Post in Leeds, Tony Danker said was “optimistic” about the growth opportunities for Britain – particularly if it can mark itself out as a world leader in decarbonisation technologies.

Earlier this week, Deutsche Bank’s chief UK economist Sanjay Raja told MPs he was sceptical about the Government’s target of hitting 2.5 per cent annual economic growth.

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He said trend growth was expected to be between one per cent and 1.5 per cent, so getting to 2.5 per cent would be a “huge undertaking” requiring “substantial amounts of supply side reform”.

Tony Danker the CBI Director General, pictured at the Embankment, Sovereign Street, Leeds.. .Picture by Simon HulmeTony Danker the CBI Director General, pictured at the Embankment, Sovereign Street, Leeds.. .Picture by Simon Hulme
Tony Danker the CBI Director General, pictured at the Embankment, Sovereign Street, Leeds.. .Picture by Simon Hulme

“To get there within five years is almost impossible,” he told MPs.

Mr Danker said while he would not be willing to put a time period on when the target could be achieved, he did believe it was possible.

"Do I think the British economy is capable of achieving 2.5 per cent growth? Yes, absolutely, 100 per cent,” he said.

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"We’re in the middle of stagflation, it takes a pretty courageous person to give you a date to say, we won’t be in stagflation we will be in 2.5 per cent growth.

"But not only have we done it before but I have always been optimistic about the growth opportunities for Britain and I remain optimistic.

"We are one of the world leaders in decarbonisation. If we deliver against that, there is according to [former Bank of England governor] Mark Carney $130 trillion dollars to go to the country that cracks it.

"We have just come off the back off a life sciences revolution that delivered the vaccine earlier than the rest of the world. If we capitalise on that, there is a huge growth opportunity.”

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"I have just sat with a bunch of Yorkshire and Humber business leaders who all want to invest – many of whom have the money to invest. There is growth for Britain available. It is clear and apparent. Does it come tomorrow? Of course not. It is a tricky patch and we certainly don’t have the skills and labour force for it.”

Mr Danker praised the ambition of the Government’s target.

"But do I believe it is realisable soon, in a period of years? Definitely. I think only by engaging in the exercise of what it would take to get to 2.5 per cent do you get bold supply-side reforms like immigration reform, planning reform, financial services regulation.

"If you aim you’ll get incremental answers that won’t change the nature of our economy and won’t get you anywhere close to the productivity levels we need to achieve.

"First of all, I think the target is believable. Secondly, even if we fail we would have done the right thing which is to get UK productivity, which has flatlined for 15 years, moving again.”

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Despite his qualified optimism for the future, Mr Danker said he did believe the UK was already in a period of stagflation, which is defined as rising inflation and slow growth.

While the UK is not yet technically in recession, Mr Danker said: “We are in stagflation for the first time in my lifetime. Policy needs to be an exercise in clutch control – you can’t just fight inflation nor can you just focus on growth. You have to do both.

"The economists will tell you exactly the point at which we are formally in stagflation. But if the question is less technical but if the question is how long has it felt like we live in a low-growth, high-inflation country, the answer is for quite a while.”