CBI slashes growth forecasts, says growth is at slowest pace in 13 years |
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Fri, 26 Aug 2005 09:05
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LONDON - The Confederation of British Industry has thrown cold water over Gordon Brown's predictions for the UK economy and has warned that the economy was set to grow at its slowest pace in over 13 years.
The CBI said that this gloomy environment had forced it to cut the 2005 GDP forecast to 1.9 percent from the previously estimated 2.5 percent. The CBI believed that the unprecedented slowdown in consumer spending had affected the economy in a very adverse manner. Chancellor Gordon Brown is struggling to meet his budget forecasts despite pegging the economic cycle back by a couple of years, according to CBI's chief economist, Ian McCafferty. "He has delayed his day of reckoning. The change to the start of the cycle gives the Chancellor more room but it leaves a structural budget deficit that is unlikely to be made up by economic growth alone," he added.
Mr. Brown had predicted in March that the economy was poised to grow at a rate of 3 and 3.5 per cent for 2005. These calculations have been hugely upset as consumer confidence has hit an all-time low and the manufacturing sector has slid into recession-like environment. The London bombings have only compounded the economy's woes with several retailers saying that sales were affected due to the attacks.
The CBI's report comes close on heels of the British Chambers of Commerce report, which had slashed growth forecasts to 2 per cent from the 2.4 per cent that it has predicted in May.
"The notion that the UK economy would rebalance [from consumer-driven growth to growth led by investments and exports] was always somewhat of a Cinderella story. It is just a little bit too optimistic. We are getting a lot of anecdotal evidence that the mood in boardrooms across the country is very cautious with regards to investment. And what there is seems to be focused on improving efficiency rather than increasing capacity," McCafferty commented.
The CBI's forecasts match those of many other firms including the Bank of England's predictions of a 2 percent growth this year.
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