Headlines
UK's CBI bumps up 2026 growth view due to 'temporary' budget boost
Published by Global Banking and Finance Review
Posted on December 12, 2025
Last updated: January 7, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on December 12, 2025
Last updated: January 7, 2026
By Andy Bruce
MANCHESTER, England, Dec 12 (Reuters) - The Confederation of British Industry on Friday bumped up its economic growth forecast for next year, citing a temporary boost to government spending following the budget, while warning that deep-rooted problems remain.
The business association predicted the economy will grow 1.3% next year, up from its previous forecast of 1.0% in June, bringing the CBI broadly into line with forecasts from the International Monetary Fund and the OECD.
It raised its forecast for this year to 1.4% from 1.2%, reflecting upward revisions to recent official data.
"While it's welcome to see our growth forecast upgraded for next year, the mood music reads more 'cautious optimism' than 'cause for celebration'," CBI chief economist Louise Hellem said.
Finance minister Rachel Reeves announced a big tax-raising budget on November 26 that will take more money from workers, people saving for a pension and investors to give herself greater room to meet her deficit-reduction targets and, to a lesser extent, fund higher welfare spending.
"There is nothing that gives a lasting impetus to investment and growth," Hellem told reporters about the budget plans. "Overall it was a budget very much focused on stability rather than growth."
The CBI sees consumer prices rising by 2.6% next year, slightly more than the Bank of England forecast last month.
That will leave the central bank with room to cut interest rates only twice more, with quarter-point moves next week and in early 2026 taking rates down to 3.5% from 4%, the CBI said.
"This would leave policy in a modestly restrictive stance, consistent with our view that inflation will remain a little above the Bank's 2% target through 2027," the CBI said.
The latest Reuters poll consensus of economists shows a slightly lower terminal rate of 3.25% for the BoE.
(Reporting by Andy Bruce; editing by David Milliken)
Gross Domestic Product (GDP) measures the total economic output of a country. It reflects the value of all goods and services produced over a specific time period.
Monetary policy refers to the actions taken by a country's central bank to control the money supply and interest rates to achieve macroeconomic goals such as controlling inflation.
Interest rates are the cost of borrowing money or the return on savings, expressed as a percentage. They are influenced by monetary policy and economic conditions.
Financial stability refers to a condition where the financial system operates effectively, with institutions able to withstand shocks and maintain confidence in the economy.
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It is typically measured annually.
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