Forecast for UK economy now more positive

CBI director-general John Cridland.
CBI director-general John Cridland.

A rise in household spending and investment growth will help to keep the UK economy on the up, according to the latest forecast from the Confederation of British Industry.

The business group is forecasting 2.6 per cent growth in gross domestic product for 2015 and 2.8 per cent next year.

The revision of those forecasts upwards is due to a combination of factors including signs of recovering productivity in the first half of this year feeding through to stronger wage growth.

Combined with continued low inflation from falling commodity prices, that will boost household spending.

Business investment is also likely to remain healthy, with surveys revealing robust plans for capital spending.

John Cridland, the confederation’s director-general, said: “We’re encouraged by the twin engined-growth of household spending, spurred by stronger wage increases and low inflation, buttressed by business investment.

“We’re also seeing tentative signs of productivity picking up, but the outlook on exports is somewhat muted.

“The strong pound is hampering our competitiveness abroad, and growth in the Eurozone, our biggest trading partner, will remain subdued for the foreseeable future, particularly given renewed uncertainty.”

Rain Newton-Smith, the confederation’s director for economics, added: “Strong domestic demand and upbeat official data since our last forecast has boosted our outlook for 2015.

“We expect this strength to continue into next year.”