UK economy set for fastest growth since 2007, according to the CBI

This weekend, the Independent reported that according to the CBI, the UK economy is “set fair” for the fastest advance since 2007 next year despite a growth blip at the end of this year.

The CBI has upgraded its forecasts for next year to 2.4 per cent – better than the 2.3 per cent pencilled in three months ago – anticipating a “solid and better-rooted” recovery. If the business group’s forecasts prove correct it would mark the quickest annual growth since the 3.4 per cent gain the year before recession struck.

Growth is expected to soften in the current quarter, down to 0.5 per cent from the 0.8 per cent registered between July and September. But returning growth in the eurozone, as well as rising business and housing investment and recovering disposable income as inflation recedes should support growth next year, it added.

CBI director-general John Cridland said: “The UK is now set fair for growth with confidence returning to Britain’s entrepreneurs. The recovery that started in the service sector has fanned out to manufacturing and construction, and is shaping up to be more broad-based. The recovery won’t be spectacular, just slow and steady, but appears more solid and better-rooted.”

The CBI forecasts interest rates on hold through 2014 and 2015, with the unemployment rate remaining at 7.3 per cent in 2015. This is above the 7 per cent threshold for rate rises set by the Bank of England under its forward guidance. CBI economics director Stephen Gifford added: “Consumer spending will rise, underpinned by increased confidence, improved credit conditions and a gradual pick-up in real incomes.”