CBI: UK seeing 'right kind of growth'

The UK economy is starting to see the right kind of growth, says employers' organisation the CBI.

"Our forecast shows encouraging signs that business investment and net trade are starting to play their part," said CBI boss John Cridland.

He said the recovery was not a "debt-fuelled, housing bubble-led recovery", as some economists have feared.

However, Mr Cridland warned that political uncertainty ahead of the election could be a real "mood killer".

"There is no doubt that business leaders are concerned about political uncertainty as we enter a lengthy election campaign," he said.

"This could be a real mood killer when business leaders are faced with making big investment decisions in the months ahead."

Export hopes

The CBI, which represents some 240,000 businesses, predicts that business investment growth will rise at its fastest rate since 2007, helped by improving confidence amongst businesses and low borrowing costs.

In addition it is predicting that export growth will strengthen as the eurozone and the broader global economy pick up.

On housing, the CBI said that most of the price increases had been in London and the South East and were not being replicated across the country.

In line with other forecasters, the business group also upgraded its growth forecast for this year to 2.6%, up from 2.4% in November and said that it saw "no prospect" of an interest rate rise until late in 2015.

Sales growth

The CBI's forecast came as a survey indicated that UK retailers saw strong sales last month, helped by rising employment and the recovery in the housing market.

The British Retail Consortium (BRC) said total sales rose 5.4% in January from a year earlier, while like-for-like sales - which strip out changes to retailers' floorspace - climbed 3.9%.

Both figures were the highest since April 2011 when sales were boosted by the timing of Easter. Excluding that, January's figures were the strongest since March 2010.

"With a record number of people now in work and the continued recovery in the housing market, we have seen very strong performances in furniture and other non-food items," said Helen Dickinson, BRC director general.

However, the BRC pointed out that while sales of non-food items had been strong, food sales had seen "very low levels of growth in the last quarter".

David McCorquodale, head of retail at KPMG, which co-produced the BRC report, said: "The divide between food and non-food is stark, with the battle for market share in food remaining ferocious, customer loyalty fickle and cost deflation being passed through to the consumer."