Global supply problems 'still dog recovery'

The strength of the UK's economic recovery in the wake of the pandemic remains "firm" despite continuing problems in the global supply chain, according to the latest forecast from the nation's largest business organisation.

Container ship seen from above
Although the Confederation of British Industry (CBI) has decreased its growth forecast to 5.1% for next year from the 6.1% it predicted in June, the organisation said it expected supply problems to dissipate by the middle of 2022.The publication on Monday of the CBI's 'Economic Forecast' coincided with a report on the state of industrial orders in Germany, which illustrated the extent supply problems were affecting companies worldwide.It showed Europe's industrial powerhouse suffered a 6.9% fall in factory orders in October, adding up to a drop of more than 12% between July and October.

UK government needs to provide a "booster" for businesses

The CBI report said that, in the UK, the government needed to provide a "booster" for businesses to support sustainable investment and to tackle longer-term challenges, notably persistently poor productivity.Tony Danker, director-general of the CBI, said, “The challenge for January 1 is now very clear for the UK economy. Significant head winds and rising costs of living threaten the extent of recovery and prospects for economic success. These hurdles for firms will provide a major test for government – can they foster sustainable UK investment and growth?“The UK’s New Year resolution must be to give firms the confidence to go for growth. We should be raising our sights on the economy’s potential and seizing the moment."Mr Danker said the nation needed targeted measures to encourage the scale of investment needed, particularly in green technologies.“But this isn’t just a challenge for government," he added. "It’s also up to businesses to step up and be part of the solution. Investment in technology and skills are among the most important steps firms can take now that will power productivity growth."

CBI predicts unemployment rate will fall

The CBI also predicted that the nation's unemployment rate would fall back to 3.8% by the end of 2023 that inflation was likely to peak at 5.2% by next spring before falling back.According to the report, the resilience of the UK’s labour market had been "a real success story", largely thanks to the government’s Job Retention Scheme, which helped stave off potentially large-scale job losses during lockdowns caused by the pandemic.

Increasing UK exports vital

Rain Newton-Smith, CBI chief economist, said that increasing exports was a vital component of sustainable growth. "Exporting companies are more productive, resilient and help create internationally competitive UK regions," she said.“We must continue to address market access barriers globally while supporting all businesses to seek growth internationally. “And there’s more we can do at home, too. By matching our peers on R&D spending we can build on existing UK strengths in areas like life sciences, higher education and decarbonisation to become the science superpower we all want to see.“But let’s not forget the importance of normalising relations with the EU – our biggest and nearest trading partner – which will aid cooperation in a host of other areas.”

Read more news and views from David Sapsted

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