CBI predicts fourth-quarter contraction and urges long-term thinking
The UK economy is likely to contract in the final three months of the year as the government’s new England-wide lockdown – put in place to slow coronavirus cases – hits businesses hard, the CBI has said.
Britain’s economy faces a “bleak midwinter,” CBI chief economist Rain Newton-Smith told journalists.
It came as the leading business lobby urged the government to use its next “spending round” to encourage investment, tackle climate change and re-skill the workforce.
Prime Minister Boris Johnson announced a new England-wide lockdown last week. People will be told to stay at home unless necessary from today, and pubs, restaurants, gyms and non-essential shops will close.
Institutions have recalibrated their economic outlooks over the past few days. The CBI was the latest to do so, saying it expected to forecast that the economy to shrink over the October to December period.
The business lobby will release its full economic forecasts in early December. It is expected to downgrade its overall outlook.
CBI urges government to act on re-training
Newton-Smith said there must be “the right measures to prevent economic scarring”. But she also said the CBI wants to “see more urgency from the government in focusing on some of the long term issues”.
Chancellor Rishi Sunak was forced to scrap plans for a three-year spending review that would have set out longer-term priorities.
Instead, the Treasury is currently thrashing out a one-year plan. As part of the process, it takes submissions from interest groups.
The CBI urged the government to focus on retraining. For example it recommended changing the apprenticeship levy, which is widely disliked by firms. It suggested a new levy that better incentivises companies to invest in the sort of worker training they need.
It also recommended the founding of a “world-class infrastructure bank” to support the recovery.
The CBI said infrastructure could help “level up” opportunities across the country. And it argued that new projects could help tackle climate change.
The Treasury has pointed to the kickstart apprenticeship scheme and funding to allow adults to take certain courses for free as evidence of its focus on retraining.