The Confederation of British Industry (CBI) has lowered its UK economic growth forecast and predicts unemployment will reach its highest level in over a decade. Rising energy prices due to global events are expected to push inflation to 3.7% next year, impacting living standards.
The CBI's revised forecasts signal a challenging economic outlook for the UK, with slower growth and increased unemployment potentially impacting businesses, consumers, and government finances.
The Confederation of British Industry (CBI) has revised down its projections for the United Kingdom's economic growth, anticipating a rise in unemployment to its highest point in over a decade. This outlook is attributed to escalating energy prices driven by global events, which are expected to strain household budgets and living standards.
The CBI's forecast indicates that UK GDP will grow by 1.1% in 2026 and 0.9% in 2027, representing a downward revision of 0.2 and 0.6 percentage points, respectively, from their December predictions. Unemployment is now projected to peak at 5.5% of the workforce, equating to 2.0 million people, a notable increase from the previously forecasted 5% and the highest level seen since mid-2015.
Consumer price inflation is anticipated to reach a peak of 3.7% in the first quarter of next year, up from 2.8% in April. The CBI's Chief Economist, Louise Hellem, noted that global shocks are exacerbating the UK's existing low-growth environment, suggesting a more positive economic conversation could be occurring without these external pressures.
Furthermore, the CBI expects the Bank of England to maintain its interest rates at 3.75% throughout 2026 and 2027. These forecasts align closely with recent projections from the OECD and the IMF. Earlier, CBI Chief Executive Rain Newton-Smith had cautioned the government against viewing businesses as a "cash tap," highlighting that businesses' tax contributions have reached a record high.