![\"Stephen](\"https:\/\/dailybusinessgroup.co.uk\/wp-content\/uploads\/2024\/07\/Stephen-Flynn.jpeg\")
Ongoing tensions in the Middle East have led the CBI to revise down its expectations for UK growth and warn that higher energy costs will weigh on households and businesses through next year.<\/p>\n
The employers\u2019 group now forecasts\u00a0UK GDP growth of\u00a01.1% in 2026\u00a0and\u00a00.9% in 2027, down from its previous projections of 1.3% and 1.5%.<\/p>\n
The downbeat outlook is published as Scotland\u2019s Economy Secretary Stephen Flynn prepares to tell the Scottish Parliament today that the Holyrood government will \u201crelentlessly\u201d focus on economic growth that people feel in the form of higher wages, stronger businesses and lower cost of living challenges.<\/p>\n
His promises will be made against the backdrop of the Iran conflict which continues to pile pressure on energy prices and disrupt supply chains.<\/p>\n
Despite strong GDP growth in the first quarter of 2026, CBI business surveys report that underlying momentum remains subdued across much of the private sector as\u00a0global shocks compound domestic headwinds.<\/p>\n
The CBI forecasts inflation\u00a0to increase towards\u00a04% by the end of 2026, while business investment will contract and consumer spending will slow\u00a0as real incomes stagnate.<\/p>\n
The CBI does not expect bank rate\u00a0to change from 3.75%, despite the likelihood that the European Central Bank will raise interest rates this week. UK unemployment\u00a0is forecast to\u00a0rise to\u00a05.5%.<\/p>\n
Louise Hellem, chief economist at the CBI, said:\u00a0\u201cWhat\u2019s happening around the world is compounding the UK\u2019s low-growth story. We saw weak momentum throughout 2025, but if it weren\u2019t for the latest global shocks, we could be having a much more positive conversation about the economy today.<\/p>\n
\u201cLast year it was tariffs and this year it\u2019s the conflict in the Middle East. The reality is that a world of elevated uncertainty and volatility is no longer the exception, it\u2019s the norm \u2013 the backdrop against which businesses must operate.<\/p>\n
\u201cThat makes getting the domestic fundamentals right more important than ever. You cannot build growth by continually increasing the tax burden on business, and you cannot solve the cost-of-living challenge without tackling the cost of doing business.\u201d<\/p>\n
Mr Flynn will attempt a positive message when he leads a debate on economic growth, setting out priority areas of Scottish Government focus \u201cto help create a more productive, dynamic and prosperous economy.\u201d<\/p>\n
He will tell MSPs: \u201cGrowing Scotland\u2019s economy is a central mission of this Government and Scotland starts from a position of real strength.<\/p>\n
\u201cBut our focus must be on growth that is felt \u2013 in higher wages, stronger and more resilient businesses and in people\u2019s ability to afford the essentials.<\/p>\n
\u201cWe are determined to build a more productive, dynamic and prosperous Scotland where growth is not measured only in statistics or announcements, but felt in people\u2019s lives\u2014in the jobs they can get, the homes they can afford, the businesses they can build and the confidence they have in their future. That is the prize before us.\u00a0 <\/p>\n
\u201cBut there can be no doubt that poor decisions taken at Westminster such as Brexit, the hike to employers national insurance contributions and the Energy Profits Levy choking investment in Aberdeen and the North East are harming our economy severely.<\/p>\n
\u201cSo while this government will act decisively on our responsibilities, we need the UK Government to recognise Scotland\u2019s economic interests rather than acting against them or it will be clearer than ever that Scotland\u2019s economy needs the fresh start of independence.\u201d<\/p>\n
\t <\/div>\n