Britain's economy will grow more slowly this year than initially hoped, finance minister George Osborne said on Wednesday, citing new forecasts from the government's fiscal watchdog.
He said the economy was projected to grow 1.7 per cent in 2011, and 2.5 per cent in 2012.
In November, growth was estimated to be 2.1 per cent this year and 2.6 per cent in 2012.
The government uses forecasts from the Office for Budget Responsibility (OBR), an independent agency it created shortly after taking office in May last year to make economic forecasting more credible.
The consensus of economists polled by Reuters is for Britain's economy to grow 1.6 per cent in 2011 and 2.2 per cent in 2012.
On inflation, which has roared up to 4.4 per cent and more on some measures, Osborne said it would remain between four and five per cent most of this year before dropping to 2.5 per cent in 2012, still above the Bank of England's two per cent target.
Reaction from the CIPD
John Philpott, chief economic adviser at the Charted Institute of Personnel and Development (CIPD), an HR professional body representing 135,000 members, said the forecast from the OBR shows that “various clouds over the U.K. economy will darken before things start to look better.”
"The OBR has cut its forecast for economic growth in 2011 from 2.1 per cent to 1.7 per cent,” said Philpott. “Unemployment is now expected to rise by around 100,000 this year before peaking at 8.2 per cent — 2.6 million — while price inflation will easily outstrip average pay increases until 2013.”
Philpott said the forecasts still look “very optimistic for 2012 onward and may well have to be revised further downward in due course.”
40,000 extra apprenticeships, 24 new technical colleges
Katerina Rudiger, CIPD skills adviser, said it was more important than ever for the government to invest in the right skills to aid economic recovery.
"The increased workplace-based training funding, especially for 40,000 extra apprenticeships, will allow British businesses to grow and become more competitive through their people. The focus on highly skilled trades, also through the creation of 24 new technical colleges, is a welcome step in the right direction as more needs to be done to improve the quality and reputation of the vocational education on offer for young people,” said Rudiger.
Increasing funding of work placements for young people is an efficient way to tackle youth unemployment, she said, that will help break the “vicious circle” of no experience, no job.
Moratorium on employment regulation for small firms a dangerous precedent: CIPD
Mike Emmott, employee relations adviser at CIPD, expressed concern about the moratorium on all new employment regulation for small firms for three years.
“The onus should be on government to bring forward only light-touch employment regulations that do good, not harm — irrespective of company size,” he said. “A moratorium for the smallest firms is a dangerous precedent that risks creating a two-tier labour market, and could even at the margins act as a perverse disincentive for growth amongst firms considering employing the extra staff member that would bring them into the 'regulated tier' of the labour market."
Universal flat-rate pension brings clarity
Charles Cotton, reward adviser for CIPD, said the universal flat-rate pension of £140 ($224 Cdn) per week brings clarity to retirement financing for workers.
"Good employers will welcome the clarity a universal flat-rate pension will bring. So long as employees have little idea of what the state will pay them in retirement, it will always be difficult for employers to focus minds on the value of the pension schemes they offer,” said Cotton. “One factor is undoubtedly the confusion and widespread ignorance created by the complexity of the existing state pension arrangements.”
— Reuters, with files from Canadian HR Reporter
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