Outlook for UK economy bright says CBI

Katja Hall said the benefits of lower oil prices would be felt. Picture: Contributed

The business body’s latest growth indicator – published today – suggests that gross domestic product (GDP) grew by 0.7 per cent in the January-March period, slightly up from the 0.6 per cent flagged recently in revised official figures for the final quarter of 2014.

However, the latest findings highlighted a sharp drop in manufacturing export orders and the CBI warned that the strong pound was weighing on already muted foreign trade performance.

Firms were hopeful of a better second quarter, though expectations were much lower than they were a year ago, the survey found.

The poll of 764 businesses showed a positive balance of 18 per cent – between firms reporting performance up compared with those saying it was down – in the three months to March. It was little changed from 19 per cent in February.

Katja Hall, the CBI’s deputy director-general, said: “The outlook for 2015 looks encouraging. Our surveys show it’s been a solid start to the year with the prospect of stronger growth to come.

“The benefits of lower oil prices should be increasingly felt, with cheaper petrol boosting households’ incomes and spending power, and cutting costs for many businesses.

“The main risk to the UK economy comes from the eurozone, with continuing wrangling over Greece’s bailout package stoking uncertainty.

“Plus, many businesses will also have to contend with a stronger pound weighing down on already weak export growth.”

Distribution businesses, such as retail, wholesale and motor traders, strengthened as did consumer services – including hotels, bars and restaurants – as well as travel and leisure firms.

But there was weaker growth in manufacturing as well as business and professional services, including accountancy, legal and marketing firms, which felt the strain of tougher competition.