UK private sector growth spurt likely to be short-lived

● Muted CBI outlook comes as Scottish Retail Consortium warns of challenges

Growth within Britain’s private sector gathered pace in the closing months of 2017, but the momentum is unlikely to be sustained going into the new year, a report today indicates.

The latest CBI Growth Indicator shows the balance of firms reporting a rise in output at +19 per cent in the three months to December, compared with just +6 per cent in the previous snapshot.

Growth was said to be broadbased, with all sectors reporting robust output volumes expansion during the period, at a pace above their long-run averages.

Looking ahead, however, private sector activity is set to return to a more “moribund” pace over the next three months, with growth predicted to stall across the services sector and to slow in distribution and manufacturing.

The indicator is a composite measure based on more than 600 respondents across the distribution, manufacturing and service sectors.

Anna Leach, the CBI’S head of economic intelligence, said: “Private sector firms are enjoying healthy activity levels as we approach the year end, but mediocre expectations for growth underline the ongoing challenges facing companies.

“Persistent cost pressures will ensure that inflation remains at a high level, perpetuating the squeeze on household spending, particularly impacting consumer-facing firms and retailers.”

Earlier this month it emerged that Scotland’s private sector economy had cooled in November but businesses were confident about future output.

Bank of Scotland’s purchasing managers’ index (PMI) fell in November to 50.2, from 52.7 the month before. While the figure – a measure of the month-on-month change in combined manufacturing and services output – was the weakest since March it remained just inside growth territory.

Businesses increased employment while there was a stronger degree of confidence regarding future output, according to the PMI study.

Meanwhile, in his new year message, published today, the director of the Scottish Retail Consortium, David Lonsdale, described 2017 as “a year of contrasts” with the year ahead holding out “a brighter prospect”.

However, he warned that Brexit could have a “profound impact” on the products that retailers’ import and stock, the items that consumers buy and the prices that they pay for them.

Lonsdale said: “2017 was a year of contrasts with shoppers benefiting from stiff competition and falling overall shop prices, but with many of Scotland’s retailers facing a testing period.

“Lifting private sector investment will be key. If government fluffs the opportunity to bear down on the costs of doing business and the cost of living over the coming year then it risks failing to stem the decline in retail jobs and shops, especially in economically fragile communities.”