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UK Economy Finishes 2015 Strongly, CBI says

As we move in to 2016, it’d be fair to say that for many businesses, 2015 was a year worth forgetting. We saw the Chinese stock markets go into a state of almost constant uncertainty, UK manufacturing falter and the services industry show some early signs of worry, and that’s without mentioning the state of the Eurozone economy to boot. However, is the figures from the Confederation of British Industry are to be believed, 2015 ended rather strongly for the nation.

The CBI, a leading employers group, said that growth in Britain’s private sector picked up speed in the three months ending in December. Indeed, the group further suggested that the momentum seen in the final quarter of the year would continue into early 2016, hinting that the slowing of the economy might ease up as we move into the middle of this New Year.

The confederation said today (04/01) that its monthly growth indicator (based on surveys of manufacturers, retailers and services) rose to a three month high of +20, up from +13 in November and above the long run average of +5. Carolyn Fairbairn, the CBI’s director-general, said: "The UK economy has finished the year strongly, with business services acting as a lightning rod for growth, nonetheless, there is no room for complacency in 2016 as significant challenges to global growth remain."

Meanwhile, a survey of CFO’s of large British companies, conducted by accountants Deloitte, showed that business confidence had fallen back to levels last seen during 2012. The slowdown in the global economy, uncertainty in global shares and the strength of the Sterling meant that British exports were hampered, leaving the recovery in the hands of consumers. Thankfully, consumer spending was helped by a combination of low inflation, falling oil prices, extremely low interest rates and rising wages. The final quarter was no doubt helped by Christmas period, which typically sees consumer spending rocket in the build up to the big day.

It’s not all good news for the economy though, as UK manufacturing suffered a disappointing December, in spite of that increased consumer spending. The UK’s manufacturing Purchasing Managers’ Index (PMI), compiled by Markit, showed that manufacturing fell to 51.9 from the 52.5 seen in November, falling short of their anticipated reading of 52.8.

That’s still above the break-even point of 50, but indicates slowing growth in the sector, potentially moving towards a state of contraction through 2016. Rob Dawson at Markit said “The UK manufacturing sector ended 2015 on a disappointing note, with its rate of growth slowing further from October’s recent high back down towards the stagnation mark. This suggests that industry will make, at best, only a marginal positive contribution to broader economic growth in the final quarter of the year.”

There’s also some concern over Britain’s planned referendum on its membership of the European Union, with some economists warning that the flex state of the result could hurt growth in 2016. With the referendum due within the next two years, the government will have to move quickly to convince businesses both home and abroad that the UK will remain in the European Union.

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