CBI urges prudence over tax cuts


Economics Correspondent

The Confederation of British Industry's survey of trends in manufacturing showed a further slowdown this month. The survey is the last economic news before Tuesday's Budget.

However, the employers' organisation said there was no evidence that the economy was heading into recession. It advised the Chancellor to keep Budget tax cuts prudent to avoid the need for higher base rates in future.

The CBI's economists trimmed their forecast for growth down to 2.5 per cent next year from an expected 2.7 per cent this year, but predicted a faster pace of expansion in 1997.

Sudhir Junankar of the CBI said: ''I do not think the evidence suggests we are at a defining moment when the economy stops growing.'' After a few sluggish months demand would pick up part-way through 1996, he said.

The CBI's forecast assumes that modest tax cuts announced next week are paid for by reductions in government spending. It predicts base rates could then fall half a point early next year, at the same time as inflation declined towards the Government's 2.5 per cent target.

On the other hand, a tax giveaway of pounds 4bn not financed by reducing expenditure would take inflation above the target. This would bring the danger of higher interest rates.

Kate Barker, the CBI's chief economist, admitted that the main risk was that growth would turn out lower than forecast. November's survey of industrial trends showed that the expansion had slowed down. ''But there is nothing in the survey to say there is a manufacturing recession,'' she said.

The balance of firms expecting output to rise during the next four months over those expecting a decline fell to 9 per cent. There was a negative balance of 9 per cent expecting above-normal orders in the next four months.

Export orders were the lowest in any monthly survey since June 1994, although still close to normal. Domestic orders were weaker than export orders.

Companies said their stocks of finished goods were more than adequate to meet demand, with the November balance of 18 per cent similar to recent months and significantly higher than earlier in the year. Big firms reported the highest stock levels. Producers of intermediate goods - and especially artificial fibres - reported well above normal levels. Ms Barker said: ''This is clearly dampening expectations of increasing output into the new year.''

Despite the continued slowdown, the balance of firms expecting to raise prices increased to 15 per cent, up four points in a month. The CBI said this reflected the traditional rise in list prices in January. Adjusting for this effect, price expectations were roughly flat.

Suggested Topics
Arts and Entertainment
The cast of The Big Bang Theory in a still from the show
tvBig Bang Theory filming delayed by contract dispute over actors' pay
England celebrate a wicket for Moeen Ali
sportMoeen Ali stars with five wickets as Cook's men level India series
Morrissey pictured in 2013
peopleGuitarist, who played with Aerosmith, Lou Reed and Alice Cooper among others, was 71
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmThe film is surprisingly witty, but could do with taking itself more seriously, says Geoffrey Macnab
Life and Style
food + drinkVegetarians enjoy food as much as anyone else, writes Susan Elkin
Life and Style
lifeDon't get caught up on climaxing
Life and Style
Arts and Entertainment
Harry Potter (Daniel Radcliffe), Hermione Granger (Emma Watson) and Ron Weasley (Rupert Grint)
newsBloomsbury unveils new covers for JK Rowling's wizarding series
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

1st Line Support Technician / Application Support

£20000 - £24000 per annum: Harrington Starr: A leading provider of web based m...

Team Secretary - (Client Development/Sales Team) - Wimbledon

£28000 - £32000 per annum: Ashdown Group: Secretary (Sales Team Support) - Mat...

Accountant / Assistant Management Accountant

Competitive (DOE): Guru Careers: We are looking for an Assistant Management Ac...

Senior Investment Accounting Change Manager

£600 - £700 per day + competitive: Orgtel: Senior Investment Accounting Change...

Day In a Page

Save the tiger: The day America’s love of backyard tigers led to a horrific bloodbath

The day America’s love of backyard tigers led to a horrific bloodbath

With only six per cent of the US population of these amazing big cats held in zoos, the Zanesville incident in 2011 was inevitable
Samuel Beckett's biographer reveals secrets of the writer's time as a French Resistance spy

How Samuel Beckett became a French Resistance spy

As this year's Samuel Beckett festival opens in Enniskillen, James Knowlson, recalls how the Irish writer risked his life for liberty and narrowly escaped capture by the Gestapo
We will remember them: relatives still honour those who fought in the Great War

We will remember them

Relatives still honour those who fought in the Great War
Star Wars Episode VII is being shot on film - and now Kodak is launching a last-ditch bid to keep celluloid alive

Kodak's last-ditch bid to keep celluloid alive

Director J J Abrams and a few digital refuseniks shoot movies on film. Simon Usborne wonders what the fuss is about
Once stilted and melodramatic, Hollywood is giving acting in video games a makeover

Acting in video games gets a makeover

David Crookes meets two of the genre's most popular voices
Could our smartphones soon be diagnosing diseases via Health Kit and Google Fit?

Could smartphones soon be diagnosing diseases?

Health Kit and Google Fit have been described as "the beginning of a health revolution"
Ryanair has turned on the 'charm offensive' but can we learn to love the cut-price carrier again?

Can we learn to love Ryanair again?

Four recent travellers give their verdicts on the carrier's improved customer service
Billionaire founder of Spanx launches range of jeans that offers

Spanx launches range of jeans

The jeans come in two styles, multiple cuts and three washes and will go on sale in the UK in October
10 best over-ear headphones

Aural pleasure: 10 best over-ear headphones

Listen to your favourite tracks with this selection, offering everything from lambskin earmuffs to stainless steel
Commonwealth Games 2014: David Millar ready to serve up gold for his beloved Scotland in the end

Commonwealth Games

David Millar ready to serve up gold for his beloved Scotland in the end
UCI Mountain Bike World Cup 2014: Downhill all the way to the top for the Atherton siblings

UCI Mountain Bike World Cup

Downhill all the way to the top for the Atherton siblings
Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star