Business gets the jitters as growth clouds gather

The increased caution among businesses will take the gloss off higher growth forecasts in this week’s Autumn Statement

UK businesses are now more jittery about the future as weakness in the eurozone and emerging markets weighs on confidence, the CBI warns today.

The increased caution among businesses will take the gloss off higher growth forecasts due to be unveiled by the Office for Budget Responsibility in this week’s Autumn Statement. The fiscal watchdog is likely to upgrade its forecasts for this year from 2.7 per cent to 3 per cent and 2015 from 2.3 per cent to around 2.5 per cent.

The CBI’s latest growth indicator – a survey of more than 700 companies – showed businesses scaling back their hopes for the months ahead. Its snapshot of sentiment showed a balance of 26 per cent of firms expecting above average orders over the next three months, well below the 42 per cent more optimistic on orders in April.

It comes as the eurozone veers close to stagnation, Japan tips back into recession and China cuts interest rates for the first time in two years to support growth.

Rain Newton-Smith, the CBI’s director of economics, said the effect of pent-up demand seen earlier this year “may be fading”. She warned: “Domestic political uncertainty is an issue for businesses but the global backdrop is a greater concern. The eurozone is weak, with a real risk of deflation, growth in emerging markets has slowed and geopolitical tensions in the Middle East and Ukraine are the biggest threats to confidence.”

Manufacturers have also slashed growth and exports expectations, according to the quarterly survey from the sector’s lobbying group, the EEF. The survey shows the weakest levels of confidence since the end of 2012, representing “a significant turnaround” from positive expectations earlier this year. The EEF’s Lee Hopley said the decline “may be an adjustment to the reality of trading conditions”.

Manufacturing grew by 0.4 per cent in the third quarter of the year, according to the Office for National Statistics. The sector has grown by 6 per cent over the past two years but still remains 4 per cent below its pre-crisis peak hit in 2007.