[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Monday, 5 December 2005, 05:37 GMT
CBI downgrades UK growth forecast
Steelmaking furnace
The CBI believes UK manufacturing output will improve
The CBI has cut its 2005 growth forecast for the British economy ahead of the chancellor's pre-Budget report.

The business leaders' group revised its estimate for UK gross domestic product to 1.7% for the year, after previously cutting its forecast to 1.9% in August.

Chancellor Gordon Brown is expected to revise his own forecast for growth of between 3% and 3.5% when he speaks in the House of Commons later on Monday.

However, the CBI said it expected the UK economy to pick-up in 2006 and 2007.

The group forecast growth of 2.2% and 2.5% respectively on the back of improved exports and strong government spending.

Debt burden

The fact that the consumer can no longer act as the motor for growth does make the UK economy highly vulnerable should developments in the rest of the world turn sour unexpectedly
Ian McCafferty, CBI chief economist

CBI chief economist Ian McCafferty said he expected sluggish UK household spending to regain some momentum amid a "stabilising" housing market.

But he added: "Spending power will be constrained by high energy costs and an unwillingness to borrow, by the past burden of debt and all those need-to-save headlines.

"The fact that the consumer can no longer act as the motor for growth does make the UK economy highly vulnerable should developments in the rest of the world turn sour unexpectedly."

The CBI said it expected manufacturing output to increase by 0.8% in 2006 and 1.3% in 2007 in response to rising global demand.

But it said that it expected overall consumer spending to remain weaker over the coming year, while earnings growth would be flat.

Official figures from the Office for National Statistics earlier this year showed that the UK economy grew by 0.4% between July and September, down from 0.5% in the previous three months.

However, the annual rate improved to 1.6% from 1.5% in the previous quarter, the slowest rate since 1993.





PRODUCTS AND SERVICES

Americas Africa Europe Middle East South Asia Asia Pacific