Pessimistic CBI Urges For Cuts To Go Ahead

The UK's biggest business lobbying group has urged the Chancellor to continue its cuts as it reduces its expectations for economic growth for the next two years.

The Confederation of British Industry (CBI) said it now expects GDP growth to be 0.9% in 2011 and 1.2% in 2012, down from 1.3% and 2.2% respectively.

The CBI said it was now urging the Chancellor to stick to current deficit reduction plans in his autumn statement and to consider measures to "kick-start growth" by unlocking private sector investment and removing further regulations.

"Continued uncertainty in the Eurozone, and the resulting weaker prospects for exports and investment have led to a marked drop in business and consumer confidence, and as a result the CBI has revised down its forecast for the UK economy," a statement from the group said.

The CBI said weak economic performance and growing fiscal instability in the Eurozone make it even more important that the Government maintains the UK's AAA credit rating.

John Cridland, CBI Director-General, said: "The Government must stick to its plans to bring down the deficit to maintain confidence in the UK's public finances and keep the cost of borrowing down.

"In uncertain economic times, confidence falters, investment grinds to a halt and job opportunities fade. This package of measures taken together could make a real difference to the economy, creating jobs and boosting growth in the years ahead."

Given the weaker prospects for domestic growth, the CBI said it expects interest rates will remain at their historic low of 0.5% throughout 2012, and start edging upwards only from 2013.

(DW/GK)