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CBI: UK showing 'right kind of growth'

14/02/14

The latest economic forecast from the Confederation of British Industry (CBI) suggests the UK's wobbly recovery from the downturn of the last few years is beginning to solidify, with investment opportunities for businesses on the rise along with increased merger and acquisition activity.

GDP is to grow by 2.6 per cent this year, which is an increase form the 2.4 per cent predicted by the CBI in November - this reflects a stronger-than-anticipated economic performance in the final months of 2013.

Furthermore, the recovery looks set to continue, with a GDP expansion of 2.5 per cent forecast for 2015. Business investment growth will move up to 6.6 per cent over the coming months, an impressive jump from the figure of -3.7 per cent recorded last year.

CBI director general John Cridland said the country is beginning to enjoy the fruits of "the right kind of growth", rather than the recovery built on shaky ground such as increased consumer spending that has been warned against by many analysts.

"In our view this is not a debt-fuelled, housing bubble-led recovery - our forecast shows encouraging signs that business investment and net trade are starting to play their part," he added.

"More businesses are feeling inclined to invest in new technology and advertising. We can also expect to see more companies coming to market to raise finance and an uptick in merger and acquisitions activity as animal spirits return."

This will be good news for financial services firms keen to take part in the ongoing economic revival, as they can play their role in offering support to businesses keen to build up their portfolios.

CBI chief policy director Katja Hall said it looks likely that borrowing costs will remain low and wages will rise at a faster rate than inflation.

This follows the latest Bank of England inflation report which confirmed that the Monetary Policy Committee intends to keep interest rates at 0.5 per cent for at least another year, offering much-needed stability to UK businesses.

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