CBI expects modest growth recovery this summer

Date: 7 May 2019

European Union flag and Union Jack flag next to Big Ben

European Union flag and Union Jack flag next to Big BenThe latest CBI Growth Indicator has found that UK private sector economic activity flatlined in the quarter to April 2019 and is “expected to pick up only slightly over the summer”.

The Growth Indicator, which is based on feedback from 532 respondents operating in the distribution, manufacturing and service sectors, showed the balance of firms reporting growth was 0%. This marked a “sixth consecutive quarter of flat or falling volumes”, the CBI observed.

Activity continued to decline in business and professional services, it said, but recovery in growth was evident in the manufacturing and distribution sectors. Within distribution, retail sales recovered after falling for five consecutive quarters, possibly due to the Easter trading period, the CBI said.

Private sector activity is expected to recover, but only by 5% in the three months to July, reflecting an increase in services volumes.

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The CBI’s Growth Indicator suggests that underlying UK economic activity remains subdued, which tallies with finding from other business surveys. While GDP growth in Q1 is likely to have received a temporary boost from stockpiling, the CBI believes that the outlook for the near future remains unchanged.

Rain Newton-Smith, CBI chief economist, said: “Underlying growth remains subdued, highlighting the need for the fog of uncertainty to be lifted, so businesses can plan and invest with confidence, allowing the UK to tackle issues other than Brexit.

“As recent protests have highlighted, climate change requires urgent attention and global leadership. There are plenty more projects – from combating underperforming productivity to making our workforce match fit for the future – which are left unfinished while the current Brexit impasse continues.

“Getting growth going again needs a relentless focus on the UK’s domestic agenda and progression to the second stage of talks with the EU, our biggest trading partner. Time-wasting is not an option,” Newton-Smith warned.

The CBI describes itself as the “UK’s most effective and influential business organisation” which “speaks on behalf of 190,000 businesses”. It views the prospect of a Brexit “no deal” as the most immediate risk to the UK economy.

“It would likely lead to both greater financial market volatility and significantly weaker economic growth than in our baseline forecast,” according to the CBI. It added: “Global risks have also [increased], particularly the prospect of a further escalation in trade protectionism, which could weigh on global investment and trade flows”.

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