The Confederation of British Industry (CBI) has reported that whilst the UK economy is expected to sidestep a recession this year, business investment is still a concern.
CREDIT: This is an edited version of an article that originally appeared on Business Matters.
Worrying doubts about confidence and business investment remain as the Bank of England is set to raise interest rates to a peak of 5% by August from 4.5% now.
CBI analysis states that the economy is on course to expand 0.4% this year and 1.8% next year. This is an upgrade on its previous forecast for a 0.4% contraction followed by growth of 1.6% in 2024.
Key factors such as falling energy prices, the reopening of China’s economy from COVID-19 restrictions and easing supply chain disruptions were the main reasons for the upgrade, the CBI stated. Other groups like the Organisation for Economic Co-operation and Development and International Monetary Fund have also bumped up their growth forecasts for Britain recently.
Responding to the announcement, investment expert Steven Mooney, Founder and CEO of FundMyPitch said: “It’s encouraging to see another major industry group forecasting that Britain will swerve a recession this year, but worrying doubts remain about the climate for business investment. SMEs make up the vast majority of businesses in the UK, and the entrepreneurs and innovators behind them need financial support to develop products, hire talent and expand.
Meanwhile finance chief Laimonas Noreika, CEO, HeavyFinance said: “As the UK avoids a recession and returns to growth, it’s troubling to see that confidence around business investment remains weak. Building a dynamic economy requires access to financial support for companies to improve, hire and develop.
Tech industry veteran Sjuul van der Leeuw, CEO of Deployteq said, “It’s encouraging to see another positive forecast for the UK economy, as businesses reboot, rebuild and go for growth. However, with indications that getting access to investment remains a challenge, it’s vital that companies think again about how they can harness the power of technology to reach new customers and increase revenue. Far too many businesses continue to operate with outdated manual systems in place for key functions such as marketing and sales, and this has to change.
Fintech entrepreneur Khalid Talukder, co-founder of DKK Partners said: “As yet another industry group lines up to present a recession-free outlook for UK PLC, it’s time to start a serious conversation about low levels of investor confidence facing the country. Britain remains a global hub for tech and financial services, yet all too often companies with bright ideas and exciting propositions struggle to expand overseas due to a lack of funding.
CBI lead economist Alpesh Paleja said, “While encouraging, there’s no getting away from the fact that this year will be another tough one for both businesses and households.”
“It’s also concerning that the UK is underperforming on many of the areas crucial to our long-term prosperity, such as business investment and trade intensity,” he said.
The CBI does not expect business investment – a weak spot for Britain’s economy since the Brexit vote of 2016 – to return to its pre-pandemic level before the end of next year.
“Making our business environment more attractive to firms at home and abroad must be front of mind in the months ahead,” Paleja said.
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