CBI gloomy on growth outlook for economy

The economy will struggle to register any growth in the fourth quarter of 2012, according to the CBI.

The employer's body said in its quarterly assessment that the crisis in the eurozone and the risk of inflation is hurting business and consumer confidence and holding back growth in the UK.

As a result the CBI reckons that growth will now be a moribund 0.2 per cent for the whole of 2012, up slightly from its previous estimate but still perilously close to recession.

As for next year the prospects are not much better, says the CBI, with growth of only 1.4 per cent expected, below previous government forecasts.

John Cridland, the CBI's director-general, said: "Despite the better-than-expected third-quarter performance, the UK economy has bumped along the bottom this year, with overall growth fairly flat. While we expect underlying momentum to pick up modestly next year and to be slightly stronger in 2014, the pace will remain relatively lacklustre.

"But major external risks including continuing uncertainty in the eurozone, and risks to inflation, will hit confidence and growth for some time to come."

Uncertainty in the eurozone, with riots in the Greek streets is likely to continue to act as a drag on business investment growth, which is expected to remain modest at around 3.8 per cent this year and 5 per cent in 2013, the group added.

Its assessment of the UK economy comes as the October results of the purchasing managers index are about to be released. The manufacturing PMI numbers are out today, followed by construction on Friday and finally the crucial services sector next week.

Most analysts expect the manufacturing and construction numbers to show either no growth or contraction, while services is expected to be a little more positive. The first estimate of GDP in the third quarter showed growth at 1 per cent but this was largely influenced by one-off positive factors such as the Olympics.