Economy faces "difficult year" but it shouldn't be exaggerated, says CBI

07 January 2008 / by Rachael Stiles
While 2008 is set to present some challenges to the UK economy, people should not exaggerate the situation and convince themselves that it is worse than it actually is, the head of the Confederation of British Industry (CBI) has said in a New Year message.

Richard Lambert, Director General of CBI said that despite the "difficult year" ahead for the British economy, with rising commodity prices and the enduring credit crunch, the most likely outcome will be a "soft landing", not a nose dive, and the country should not allow itself to "get carried away by today’s gloomy headlines."

There is still much to be cheerful for, he said, including the equity that many people hold in their homes, which will provide "a comfortable cushion to fall back on if times get tough."

He also lists several other things that offer hope for the coming year, such as inflation expectations – which have been kept under control by the Bank of England, a flexible labour market, a relatively positive outlook for the global market, and a new phase for the UK economy which will rearrange financial priorities.

Mr. Lambert recognises that there are some major challenges facing the UK economy, such as the global credit crunch, which has "paralysed the credit and interbank markets" and is questioning the certainty of the economic outlook. He also highlights the effects of the consequential slowdown in the economy, which will leave its mark on the property market, threatening "serious consequences" if there is a sharp reversal of the last decade's rapid growth. Consumer debt, he says, will also exacerbate the situation.

While he predicts challenging but positive times ahead, Mr. Lambert also marks out some priorities for the UK economy which must be addressed, such as raising national skills and knowledge at every level, maintaining and strengthening the flexible labour market, development of the economic infrastructure. He also said that a "major effort" will be required from both business and government to deal with the challenge of climate change.

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