Economy in brief: May 2023

The CBI’s economic service

The CBI took the difficult decision to pause member and policy activity on the 21st April. We at the CBI are determined to reform and refocus the CBI in order to drive forward the changes that matter for our people, our business, your businesses and society and rebuild trust in our organisation.

In the current context, we are redeploying the staff of our economics directorate to the delivery of economic intelligence products for members. The economics directorate employs macroeconomists, survey specialists, tax professionals, economic policy experts and those with economic consulting experience. They provide analytical support to the CBI’s policy work, run the CBI’s economic surveys (going more than 60 years), produce the CBI macroeconomic forecast, deliver the CBI’s Budget submissions to HM Treasury, undertake tax policy analysis in support of the CBI’s tax lobbying work and have been part of the CBI Economics consulting business.

Over the coming weeks, the team will deliver a variety of economic pieces to support our members (e.g. next week we’ll do pieces around the GDP data and the MPC’s interest rate decision and their latest forecast updates). We hope that you find our work useful and welcome your feedback.

Recent economic news, the outlook and risks

The UK economy has been supported by some positive tailwinds so far this year: China’s reopening has proceeded in a more orderly fashion than feared; gas prices have been lower than expected; consumer confidence has improved; spending impetus has been greater than expected; and the impact from pandemic-related supply chain disruption has continued to diminish.

Over the rest of this year, activity in the UK is expected to gradually improve as inflation falls back following the decline in gas prices, and the squeeze on incomes ease. This will support ongoing improvements in economic conditions, but there remains the risk that broader inflationary pressures become intrenched, which would necessitate further interest rate rises from the Bank of England. Business investment should be supported by improving activity, but finance costs are now higher following the rise in interest rates, and weakness in the housing market undermines the overall investment outlook. Meanwhile, government spending is set to soften after successive periods of government support during the pandemic and to help with energy bills.

Circling the main drivers of the growth outlook are risks from global financial market disruption as markets adjust to higher interest rates amidst high global inflation, tight labour markets, pressure on health systems, and the impact of ChatGPT. These are some of the themes we’ll be covering in more detail in the coming weeks.