CBI says UK set to dodge recession, but business investment remains weak

The UK economy is likely to avoid a recession this year, according to trade body the Confederation of British Industry (CBI). However, worrying doubts about confidence and business investment remain as the Bank of England is set to raise interest rates to a peak of 5% by August from 4.5% now.

CBI analysis states that the economy is on course to expand 0.4% this year and 1.8% next year. This is an upgrade on its previous forecast for a 0.4% contraction followed by growth of 1.6% in 2024.

Key factors such as falling energy prices, the reopening of China’s economy from Covid-19 restrictions and easing supply chain disruptions were the main reasons for the upgrade, the CBI stated. Other groups like the Organisation for Economic Co-operation and Development and International Monetary Fund have also bumped up their growth forecasts for Britain recently.

Responding to the announcement, investment expert Steven Mooney, founder and CEO of FundMyPitch said: “It’s encouraging to see another major industry group forecasting that Britain will swerve a recession this year, but worrying doubts remain about the climate for business investment. SMEs make up the vast majority of businesses in the UK, and the entrepreneurs and innovators behind them need financial support to develop products, hire talent and expand.

Mooney continued, “Without a thriving community of properly backed start-ups, it will be increasingly difficult to deliver sustainable growth for the long term. It’s time to rethink our approach to investment, giving young companies a level playing field to secure a credible valuation, get funding and get growing.”

Meanwhile finance chief Laimonas Noreika, CEO, HeavyFinance said: “As the UK avoids a recession and returns to growth, it’s troubling to see that confidence around business investment remains weak. Building a dynamic economy requires access to financial support for companies to improve, hire and develop.

“The global race to cut carbon emissions and develop greener, cleaner business models requires substantial investment and long-term thinking. It’s critical that ambitious companies who are looking to improve their environmental credentials and grow are fully supported with strong financial backing to make change happen,” he added.

Tech industry veteran Sjuul van der Leeuw, CEO of Deployteq said, “It’s encouraging to see another positive forecast for the UK economy, as businesses reboot, rebuild and go for growth. However, with indications that getting access to investment remains a challenge, it’s vital that companies think again about how they can harness the power of technology to reach new customers and increase revenue. Far too many businesses continue to operate with outdated manual systems in place for key functions such as marketing and sales, and this has to change.

“The rise of generative AI technology and automation can enable rapid scaling and improve customer services and long term growth,” he concluded.

Fintech entrepreneur Khalid Talukder, co-founder of DKK Partners said: “As yet another industry group lines up to present a recession-free outlook for UK PLC, it’s time to start a serious conversation about low levels of investor confidence facing the country. Britain remains a global hub for tech and financial services, yet all too often companies with bright ideas and exciting propositions struggle to expand overseas due to a lack of funding.

“We need to foster a culture of rapid growth, by giving fast-growing companies access to international payments, banking services, and full financial backing to enable them to reach their full potential,” added Talukder.

CBI lead economist Alpesh Paleja said, “While encouraging, there’s no getting away from the fact that this year will be another tough one for both businesses and households.”

“It’s also concerning that the UK is underperforming on many of the areas crucial to our long-term prosperity, such as business investment and trade intensity,” he said.

The CBI does not expect business investment – a weak spot for Britain’s economy since the Brexit vote of 2016 – to return to its pre-pandemic level before the end of next year.

“Making our business environment more attractive to firms at home and abroad must be front of mind in the months ahead,” Paleja said.