CBI warns of ‘lost decade of growth’

With soaring inflation, a shrinking economy, and a drop in productivity and business investment, the UK is facing a decade of lost economic growth if action is not taken.

That’s the stark warning from business group the CBI, which has urged the Prime Minister and Chancellor to “use all levers at their disposal” to boost long-term growth.

It comes as the CBI downgraded its GDP growth forecast for 2023, saying that it now expects the UK economy to contract by 0.4% next year compared with its earlier forecast of 1.0% growth.

The organisation called on the government to address skill and worker shortages and unlock business investment through capital allowances and regulatory changes, such as removing the de facto ban on onshore wind, improving mobility to facilitate trade in services and updating the national planning policy framework.

“Firms see potential growth opportunities but a lack of ‘reasons to believe’ in the face of headwinds are causing them to pause investing in 2023,” explained CBI Director-General Tony Danker.

“Government can change this. Their action or inaction to support growth and investment will be a key determinant of whether recession is shallow or deep.

“We will see a lost decade of growth if action isn’t taken. GDP is a simple multiplier of two factors: people and their productivity. But we don’t have people we need, nor the productivity.”

Alpesh Paleja, lead economist at the CBI, added that weakness in productivity and business investment “appears to be bedding in” which does not bode well for living standards and the economy’s capacity to grow over the longer term.

“The time for action is now. The government should leverage more business investment to drive growth. Our analysis shows a permanent full allowances regime would unlock an extra £50bn in capital investment per year by the end of the decade.”