Economic News

CBI Economic Update:

UK economic growth tepid, while global economic outlook deteriorates

The UK economy continued to settle into a slower growth momentum in Q4 2018, although there has been some positive news recently in the form of lower inflation, continually record-high employment, and firmer wage growth.

UK economic growth tepid, while global economic outlook deteriorates

This week the IMF released data showing continued concerns about the outlook for the global economy, amid faster-than-expected slowdowns in the Eurozone and emerging markets.

The latest IMF World Economic Outlook Update noted that the outlook for the global economy in the near term had weakened as risks to the downside loomed larger. The IMF’s forecasts for global growth in 2019 and 2020 were revised downwards (to 3.5% from 3.7% and 3.6% from 3.7%, respectively) from October’s forecast. This downgrade was primarily driven by a weaker outlook for the Eurozone – due to factors such as weak domestic demand in Germany and Italy and the gilets jaunes protests in France – and key emerging markets (primarily due to a forecasted sharp contraction in Turkey in 2019). The IMF flagged notable downside risks to the outlook, including an escalation in China-US trade tensions and a number of potential triggers to further financial market volatility and risk aversion. The latter include continued stress in Italian debt markets, a “no deal” Brexit, and a faster-than-expected slowdown in China.

The IMF’s UK’s growth forecast for 2019 was unchanged at 1.5%, while growth in 2020 was revised up 0.1pp to 1.6% (by comparison, the CBI’s forecast for growth is 1.4% in 2019 and 1.6% in 2020). The IMF observed that the fiscal stimulus measures announced in the Autumn Budget had been offset by continued Brexit uncertainty across the forecast period. Notably, the UK forecast remained predicated on a Brexit deal being reached in 2019 and a gradual transition to a new regime, an assumption around which the IMF flagged a high degree of uncertainty.

Elsewhere, the ONS’ estimate of monthly GDP for November 2018 showed that UK growth edged slightly lower in the three months to November (0.3% from 0.4% in October). This slower momentum chimes with the softer outlook seen in the CBI’s Growth Indicator at the end of last year. Services growth softened in the quarter to November, although retail performed strongly on the back of Black Friday sales. Construction also contributed positively to economic growth, as it continued to recover from a poor start to 2018. Meanwhile, manufacturing was a drag on growth for the second rolling quarter in a row.

Encouragingly for consumers, CPI inflation slowed to its lowest rate in nearly two years in the year to December (2.1%). Falling fuel prices provided the biggest downwards contribution to inflation, while higher hotel prices were one of the primary upward contributions. Near-term risks to inflation seem to be skewed to the downside due to the recent volatility in global oil prices and softer global economic momentum. That being said, the Bank of England’s Monetary Policy Committee is likely to continue gradually increasing rates due to building domestic inflationary pressures (such as firmer wage growth and limited spare capacity in the UK economy). But, the outlook for monetary policy remains heavily contingent on Brexit-related developments in the coming months.

The latest CBI business surveys suggested that many UK businesses have been affected by the ongoing Brexit uncertainty. The CBI/PwC Financial Services Survey reported that business volumes in the financial services sector contracted for the first time since September 2013. This drop coincided with a further deterioration in financial services’ sentiment, rounding off three full years of flat or falling optimism. Financial services firms see macroeconomic uncertainty as the most important challenge over the year ahead, ahead of regulatory compliance and preparing for the impact of Brexit.

Finally, the January CBI Industrial Trends Survey reported that manufacturing output continued to grow at an above-average pace in the three months to January. Total orders were flat, however, with domestic orders reported as steady and export orders recovering only slightly from a drop in October. In particular, manufacturers reported heightened concerns about overseas political/economic conditions as a constraint on export orders. Investment intentions for the year ahead remained noticeably negative, as business sentiment dropped at its fastest since the EU referendum.

Brexit Update: CBI sets out business impact of a ‘no deal’ Brexit in every region and nation across the UK.

CBI analysis of government figures underlines importance of ‘no deal’ being taken off the table to prevent economic fallout and protect jobs and living standards.

CBI sets out business impact of a ‘no deal’ Brexit in every region and nation across the UK

Following last week’s Brexit vote, where the Prime Minister’s deal was defeated, Theresa May gave a statement in the House of Commons on Monday outlining the government’s next steps on Brexit.

Responding to the vote and the statement, the CBI has been clear that a March no deal must be taken off the table. This was backed up with CBI’s fresh analysis on the long-term economic impact of a ‘no deal’ Brexit which included over 40 real-world case studies of companies in every UK region outlining why no deal would be so damaging for their business. Shared concerns include border delays destroying carefully built supply chains and extra costs and tariffs damaging competitiveness.

Read CBI’s latest no deal regional analysis

The CBI’s economic impact of a ‘no deal’ Brexit analysis received extensive regional media coverage, featuring in the Yorkshire Post, The Times (Scotland) and BBC Spotlight (TV). Further to this, national press also covered the impact of a no deal in Newspapers including The Guardian, The Daily Mail and The Express.

While taking a March no deal off the table would provide some much-needed respite for many businesses, it is clear that the Brexit deadlock will only be broken by a genuine attempt by all MPs to find consensus and compromise. Next week will see MPs debate a series of amendments in response to the Prime Minister’s statement on the government next steps on Brexit, including proposals to rule out a March no deal. Those amendments selected by the speaker on Tuesday 29 January will be voted on by MPs later that evening.  Following the vote, the CBI will be consulting its Chairs Committee on Wednesday to help inform next steps.

Other News

PHE publishes NDNS data for 2008-2017

Public Health England (PHE) has published the National Diet and Nutrition Survey (NDNS) results from 2008 to 2017. This report presents time trend and income analyses of food consumption, nutrient intake and nutritional status data for adults and children from 1.5 years in the UK, as well as seasonal differences in blood levels of vitamin D.  The results show that over this 9 year period, the proportion of children consuming sugar-sweetened soft drinks dropped by 26%, 35% and 17% for those aged 1.5 to 3 years, 4 to 10 years and 11 to 18 years respectively. For those children who drank sugar-sweetened soft drinks, intake also fell significantly over time. There was a downward linear trend in intake of fruit juice over time among consumers in all age/sex groups although there was little change in the proportions drinking it.  There was little change in intake of fruit and vegetables over the period: all age/sex groups had a mean fruit and vegetable intake below the 5-A-Day recommendation.  There was also little change in intake of oily fish over the period, while intake of red and processed meat showed a downward trend over time. There was a significant decrease over time in sodium intake in all age/sex groups. There was a downward trend in intakes of most vitamins and minerals over the  period for many age/sex groups. All age/sex groups showed a significant reduction in vitamin A and folate intake over  the 9 years.  For girls aged 11 to 18 years and women aged 19 to 64 years, the proportion with intakes below the Lower Reference Nutrient Intake (LRNI) increased by 9% and 6% respectively over the period; and the average intake for girls aged 11 to 18 years dropped and remained below the RNI.

Brexit-Employment Issues: The Migration Advisory Committee’s (MAC) Shortage Occupation List (SOL) ‘call for evidence’, whereby stakeholders were encouraged to submit evidence online in relation to any job titles or occupations believed to be in shortage, is now closed.  The MAC is an independent, non-statutory, non-time limited, non-departmental public body that advises the government on migration issues.

As a follow-up to the ‘call for evidence’ the MAC, in conjunction with the British Chamber of Commerce (BCC) are arranging a number of roundtable meetings across the country. The purpose of these meetings is to:

• engage with employers across the regions and countries of the UK to hear their concerns and issues with regards to shortages
• identify if there are any synergies or differences in the evidence submitted
• gather a more in depth understanding which complements the online evidence

There are limited spaces available at these events and therefore you should contact the MAC at Keval.Mulji@homeoffice.gov.uk if you wish to attend. You can find a link with more information here: https://www.gov.uk/government/consultations/shortage-occupation-list-2018-call-for-evidence/sol-commission-2019-regional-roundtable-events

Date confirmed:

West Midlands: Birmingham
Tuesday 29 January, 1pm to 3pm
148 Edmund St
Birmingham
B3 2JR

Further locations and dates to be announced soon are:

• East of England: TBC
• London: TBC
• North East: TBC
• North West: TBC
• Northern Ireland: Belfast
• Scotland: Edinburgh
• South East: TBC
• South West: TBC
• Wales: Newport/Swansea, Cardiff
• Yorkshire and the Humber: TBC