Private sector growth expected to continue at healthy pace next quarter

Strong private sector growth over Q3 is expected to continue, despite an uncertain year, a new study finds.

The UK private sector growth picked up in the three months to October (+8 per cent) following broadly flat output in September (+3 per cent), and the economy is expected to continue growing at a healthy pace in the coming quarter, according to the latest CBI Growth Indicator.

The surveys of 764 respondents shows that sector performance was mixed. Output continued to rise at a robust pace in manufacturing and distribution, meanwhile, activity remained flat in consumer services, while only marginal growth was recorded in business & professional services.

Businesses expect a further increase in activity in the next three months (+13 per cent), with predictions of healthy growth broad-based across all sectors.

The affects of the fluctuating pound will be a cause for concern for many businesses. The plunging pound following the Brexit decision in Q3 sees 28 per cent of SMEs feeling the negative impact of exchange rate movements and government regulations.

A quarter (24 per cent) of businesses say the volatile uncertainty of the last few months has negatively impacted on their business, affecting sales and finances.

Rain Newton-Smith, CBI chief economist, thinks that, as temperatures cool, private sector growth is picking up and it’s encouraging that firms expect activity to continue at a healthy pace in the next three months.

Newton-Smith continues, ‘Manufacturing exports are riding high on the back of weaker Sterling and consumers are continuing to spend on the high street, but activity is more modest in the services sector.

‘Although growth will be robust for the remainder of this year, we expect uncertainty around the UK’s relationship with the EU to dampen business investment in 2017, along with a rise in inflation which will knock household spending.’

He concludes, ‘The government can help keep the economy firing by pressing ahead with infrastructure commitments across the whole of the UK and by promoting innovation in the Autumn Statement.’

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