CBI cuts UK growth forecast
Employers' lobby group the CBI has cut its forecast of UK economic growth with higher food and fuel prices also likely to send inflation higher.
The CBI now expects the UK economy will grow at a slower than predicted rate of 1.8% this year, a 0.2% reduction, and by 1.7% in 2009.
"We are facing a financial shock on a scale not experienced in recent times, which is coming on top of already slower growth," CBI director-general Richard Lambert said.
The forecast for 2009 compares with chancellor Alistair Darling's estimate of growth between 2.25% to 2.75%.
(Article continues below)Advertisement
At the same time as the economy slows, inflation is due to rise, peaking at 3.2% in the third quarter of 2008 and forcing the Governor of the Bank of England to write a second letter to the Chancellor, the CBI said. The previous forecast of peak inflation was 2.7%.
In response, the CBI expects two quarter point interest rate cuts this year and a further reduction in 2009 to 4.5%.
Lambert, insisted, though, that the picture is not all gloom.
"Outside the financial and property sectors the overall mood of business is, however, nothing like as gloomy as you might guess from reading today's headlines. While there are signs of a high street slowdown and some firms say it's getting harder to raise bank finance, around the country many still report quite positive conditions," he said.
