Manufacturers face ‘dark cloud of uncertainty’: CBI

By Noli Dinkovski

- Last updated on GMT

The food and drink industry accounts for 16% of total UK manufacturing turnover
The food and drink industry accounts for 16% of total UK manufacturing turnover

Related tags: European union, United kingdom

The UK economy is predicted to grow more slowly than previously forecast over the next two years as global economic risks heighten, according to the Confederation of British Industry (CBI).

Deterioration in the global economic outlook, including weaker prospects for China and other emerging markets, continued to represent major challenges to the UK economy, the CBI claimed.

Uncertainty ahead of the EU referendum is also starting to weigh on investment plans, the business group added.

The CBI’s central economic forecast was carried out on the basis of the UK current membership of the EU.

The news will come as a blow to the food and drink industry, which accounts for 16% of total UK manufacturing turnover. Annually, it adds £21.5bn to the UK economy, making it the largest manufacturing sector in the UK, according to latest figures from the Food and Drink Federation.

Latest quarterly forecast

The CBI’s latest quarterly forecast predicted that the UK’s gross domestic product (GDP) would grow by 2.0% in both 2016 and 2017, both of which are downgrades from its last forecast in February (2016: 2.3%, 2017: 2.1%).

The economy had a softer than expected start to the year, which has contributed to a large part of the downgrade in GDP growth in 2016.

CBI director-general Carolyn Fairbairn said: “We expect the UK’s growth path to continue but it is likely to be at a slower rate than previously thought.

“A dark cloud of uncertainty is looming over global growth, particularly around weakening emerging markets and the outcome of the EU referendum, which is chilling some firms’ plans to invest.

“At present, the economic signals are mixed – we are in an unusually uncertain period.”

Interest rate rise

The CBI believed that the timing of a first rise in interest rates would now be in the second quarter of 2017 (rising to 0.75%) against the backdrop of slower growth.

Investment spending was expected to ease in the near-term, amid some signs that referendum uncertainty was bearing down on plans for capital spending.

However, a recovery in investment was expected in the second half of 2016, and that business investment would account for around a quarter of growth in 2016, and a third in 2017.

Once again, net trade was not expected to provide much support to growth. While the CBI expected a smaller drag in 2016, down 0.2 percentage points (ppts) relative to February (down 0.5ppts), this mostly reflected a larger downgrade to import growth rather than much of a recovery in exports.

On the international front, growth in advanced economies should continue at a steady, if subdued, pace over the next couple of years, with the forecast for US growth at 2.0% in 2016 (from 2.4% in 2015), rising to 2.3% next year.

The recovery in the Eurozone should pick up a little further, with GDP growth forecast at 1.6% in 2016 (from 1.5% in 2015). And while growth in China (6.5%) and India (7.4%) will outperform the advanced economies over the next two years, prospects for the rest of the emerging world remained weak and commodity exporters would feel the hit from low prices, the CBI claimed.

Reader survey: your help is needed

The Food Manufacture Group is running its annual ‘state of the industry’ survey to find out what issues are causing you the most concern.

By completing the three-minute survey, you will also be entered into a draw to win £100 in Amazon vouchers.

The results of the survey and the winner of the draw will be published in the July issue of Food Manufacture​.

To complete the survey click here​ .

Related news

Show more

1 comment

Manufacturers face ‘dark cloud of uncertainty’: CBI

Posted by R Yeatley,

Oh, the CBI again.

Remember when they told us we'd be doomed to all sorts of things if we did not joint the euro?

Well, google for: "Business: The Economy Business backs euro, says CBI".

We were told similar rubbish back then. Thank God we did not join.

Similarly, now, we must leave the eu to preserve ourselves.

Report abuse