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March 27, 2014

Growth slows but outlook still bright, says CBI

Growth slows but outlook still bright, says CBIEconomic growth slowed in March to an eight-month low after hitting record levels in February, according to the latest Confederation of British Industry (CBI) Growth Indicator Survey.

The survey of 622 respondents across manufacturing, retail and service sectors registered robust growth in output volumes, with a balance of +19%, down from a record +32% in February.

Despite this slowdown, growth remains strong and is well above average, says the CBI. All sectors contributed to the slowdown in output growth, including consumer, business, professional services and the retail sector.

The CBI says the outlook for the next quarter is bright, with growth expected to accelerate again, driven by strength in the service sector. According to its survey findings, businesses are optimistic about the outlook for output growth over the next quarter with the expectations balance at +36%.

Anna Leach, CBI head of economic analysis, said: "Although growth has slowed from record levels last month, it remains strong and firms are optimistic it will pick up again in the next quarter. As this year progresses, we expect further increases in business and consumer confidence. Productivity and earnings should also start to recover."

Leach added a note of caution, however: "Global developments continue to pose a risk to UK growth, not least the risk of renewed problems in the Eurozone."

Meanwhile, a new report from Ingenious Britain warns that as the economic recovery takes hold, businesses could be at risk if there is a rise in interest rates coupled with a lower tolerance of company debt.

According to a report from The Corporate Finance Network, 65% of UK SMEs have poor credit ratings and it says that many firms have survived so far through the support of HMRC, the banks and low interest rates. When the "artificial economy" comes to an end, it says businesses will either turn the corner or go out of business.

Marlon Wolff, CEO of Ingenious Britain, said: "Confidence is vital if the recovery is not only to be maintained but also to really take hold and deliver vibrancy back to the UK small business sector. Authorities have been quick to provide protection to other sectors and given that the majority of people in the UK either own or work for a small business, we would urge them to do so for the SME sector too."

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