Brexit and skills shortages 'dog economic prospects'

The UK's economic prospects are being dogged by weak productivity and uncertainty surrounding Brexit according to the latest economic forecast from the Confederation of British Industry (CBI)

Brexit and skills shortages 'dog economic prospects'
Brexit uncertainty, global protectionism and skills shortages are "looming large" over the prospects for investment by UK companies, according to the latest economic forecast from the Confederation of British Industry (CBI).The report, published today, said the challenges made "the need to focus on the drivers of domestic success - where government and business have greater control – critical for driving growth".

Wage growth likely to remain modest

The CBI said the economy was evolving largely in line with the organisation's expectations. GDP growth is now forecast to be 1.4 per cent this year and 1.3 per cent next."Despite real pay growth inching into positive territory, living standards will continue to be dogged by weak productivity. As a result, any further pick-up in real wages is likely to be modest, continuing to weigh on consumer spending throughout our forecast," said the CBI.The organisation said the economic outlook would improve if the government and firms focused on productivity improvements at home and on opportunities abroad, the latter buoyed by a low pound and a strong global economy.

Uncertainty around Brexit affecting investment

While uncertainty around Brexit continued to affect some investment decisions, the report said there were early signs of investment being unlocked as firms turned to AI and digitalisation to achieve efficiencies and raise productivity.Rain Newton-Smith, CBI chief economist, said, “Snow capped a sluggish start to 2018 for the UK economy, and there’s no disguising that Britain now finds itself in the ‘slow lane’ for growth.“Businesses can do little to mitigate wider risks, but many firms are doing what they can to get themselves in good shape by investing in AI and digitalisation.“Productivity weakness is a structural challenge for the UK economy and a drag on living standards. Many businesses are taking action now to change this. Adapting technologies and finding smarter ways of working are just two approaches to improving productivity growth and prosperity. Recent government announcements on funding to help share best practice among companies and targets for full fibre-broadband are good steps in the right direction.“Over the longer term, firms must work with government to nurture a pro-enterprise environment to drive growth and create wealth. And there is much within the UK’s control that can be acted on now. Creating extra capacity at Heathrow will allow firms to tap into global opportunities more seamlessly. Building skills fit for the 21st century is essential too, so getting new technical education routes right really matters.“As the UK leaves the EU, we know the world is watching: so business and government must work together to drive competitiveness at home so firms can make the most of opportunities overseas.”

UK firms need to 'get export ready'

But the report said the economic outlook for the UK economy remained dogged by downside risks, not least of which was the possibility of a disorderly Brexit, which could disrupt the economy and financial markets more than expected, the CBI warned.
Alpesh Paleja, CBI principal economist, said, “With the pound low and the global economy firing ahead, there’s never been a better time for UK firms to get export ready. Looking ahead, we expect more of a lift to the economy from net trade, marking a shift in the composition of economic growth.“Yet at home, momentum is set to remain weak. Households remain under pressure from lacklustre wage growth, while businesses are grappling with skill shortages. In some sectors, particularly retail, trading environments remain tough.“While many companies are turning their attention to AI, automation and streamlining operations to stay competitive, there is only so much that they can do when Brexit uncertainty continues to loom large.“Therefore, getting clarity on the future economic relationship between the UK and the EU - by building on progress made in March - is vital for firms of all sizes on both sides of the Channel. Hitting important milestones in negotiations will give businesses the certainty that they need to invest and plan for the future.”Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online DirectoryClick to get to the Relocate Global Online Directory 

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