UK economic growth – a tale of two halves

Despite warnings earlier this year, the UK has so far managed to do the unthinkable and avoid recession. Growth has strengthened, global price pressures have waned, and inflation has started to show signs that it will move towards historic levels of 2% in the coming few years.??

As shown by the CBI’s Economic Forecast, the UK is set to build on these glimmers of hope in the months and years ahead. Business investment is expected to return to its pre-COVID level by the end of 2024, and productivity is set to pick up over next year as GDP growth overtakes employment growth.??

However, despite this, government and business can’t take the economy for granted. The future of the UK’s economic situation remains uncertain, and this year will continue to be challenging for firms and consumers alike. Interest rates are set to increase yet again this month, and for the first time in four decades, we at the CBI expect real household incomes to drop for a second year running.??

GDP is still following a broadly flat trend, and sustainable growth seems out of reach. And long-term issues in the UK economy such as domestic price pressures, insufficient business investment and trade intensity and low productivity, means that The South West and the country will be facing a de-facto economic stagnation for the foreseeable future.??

For firms, business as usual won’t solve these issues. They need confidence to persuade them to invest in the skills and productivity needed to overturn the headwinds and build long term growth. This means supporting them to fill vacancies, fix the labour shortage crisis and in turn boosting the growth potential of the South West of England and the UK.?

Increasing the size of the economy also means focusing on investment. Despite a forecasted uptick next year, business investment in the UK is lower than a number of our international competitors. If we’re going to grow the economy and meet our net-zero targets, then we need to drive investors to the South West and the UK as a whole.??

Picking up the pace on these issues will steer us clear of recession. It will drive sustainable growth and make the economy more productive, greener and a better place for business leaders to create or expand their business.???

However, we can’t get there until business and government work together in creating a better economy.?

While the economic outlook looks much brighter going forwards, firms in the South West and across the UK won’t be able to feel confident while the risk of recession looms and high interest rates squeeze their ambition. Avoiding recession isn’t enough - the business community needs a strong economy, instilling confidence that Britain can reach the top of the global league tables once again.?