Business investment will return this year as the “right kind of growth” takes hold, according to the latest forecast from the CBI, which represents some 240,000 businesses.
The business lobby group predicts that firms’ capital expenditure will grow by 6.6 per cent this year, following a 3.7 per cent contraction last year and expects this to be followed by an 8.3 per cent expansion in investment in 2015. The organisation also foresees that corporate spending will be supported by improving confidence and continued low borrowing costs.
The CBI also expects the economy’s rebalancing to be supported by a rise in exports this year, as the Eurozone recovers and demand from the rest of the world grows. It believes that overseas sales will rise by 3.6 per cent in 2014 and 4.7 per cent in 2015.
According to John Cridland, the CBI’s Director-General, this is not a debt-fuelled, housing bubble-led recovery. More businesses are feeling inclined to invest in new technology and advertising, he said, adding that he also expects to see more firms coming to market to raise finance and an uptick in merger and acquisitions activity as spirits return.
However, he also warned that political uncertainty ahead of the election could be a real “mood killer”, because business leaders are concerned about political uncertainty during what is sure to be a lengthy election campaign.
Meanwhile, there are further signs that the consumer continues to assist the recovery, with the latest British Retail Consortium survey of retailers pointing to the strongest growth in almost four years in January. Total sales were up 5.4 per cent year on year, the strongest growth since March 2010.