The CBI expects the economy to grow modestly in 2013 (1%), with the pace picking up in 2014 with growth of 2% according to its latest economic forecast published today.
John Cridland, the CBI director-general, said: “We are beginning to see the return of organic growth, with clear signs that firms offering the right products into the right markets are growing sales and expanding.
“Recent business surveys also give grounds for cautious optimism about our forward prospects.”
However Cridland said external risks to the outlook in the eurozone and further afield are likely to keep growth at home and abroad in check.
“The potential for eurozone tensions to flare up again, coupled with tough conditions in the domestic market, explain why business confidence remains patchy. After the uncertainties of 2012 the fear of external storm clouds lingers.”
The CBI is forecasting that inflation will edge higher until mid-2013 but will fall back in the second half of the year and will be close to the Bank of England’s 2% target throughout 2014.
It also believes unemployment levels are unlikely to change significantly over the forecast period, at 2.5m and 2.42m in 2013 and 2014 respectively.
Cridland said conditions will still be difficult for households in 2013, given weak growth in household spending power and unemployment at around 7.8%. Household consumption growth of 1.1% is expected this year.
Mr Cridland added: “The recovery is a long drawn out process of adjustment, alongside deficit reduction, but there’s still scope for policy to provide further support.
“We’ve called for the Government to boost capital spending by digging a bit deeper on current expenditure, and to get investment spending flowing in the short term, for example on much-needed repair and maintenance of the roads system.”
