THE Confederation of British Industry has cut its UK growth forecasts for both this year and 2017 to rates that are further below the country’s long-term average pace of expansion.

Meanwhile, figures from the Office for National Statistics show that UK industrial production tumbled in December by 1.1 per cent, the sharpest monthly drop since September 2012.

The manufacturing output component of industrial production fell by 0.2 per cent month-on-month in December. Economists had forecast a 0.1 per cent rise. The ONS figures show that oil and gas extraction proved a drag on industrial production, falling by 4.6 per cent month-on-month in December.

The industrial production figures provide further evidence of the very unbalanced nature of the UK recovery.

Overall UK growth has been stuck below its long-term rate trend in recent quarters.

The CBI is today cutting its prediction of growth in UK gross domestic product (GDP) this year to 2.3 per cent, from the 2.6 per cent rate it forecast in November.

This revised growth projection is well below the UK’s long-term average annual rate of expansion, which has been put by Bank of England Governor Mark Carney at around 2.75 per cent. The UK economy grew at a below-trend pace of 2.2 per cent in 2015, according to figures published by the ONS late last month.

And the CBI is cutting its forecast of UK growth in 2017 from 2.4 per cent to 2.1 per cent.

Explaining its growth forecast downgrades, the CBI cites revisions to past GDP, declaring “momentum in the economy over 2015 was slightly less than previously thought”.

However it also highlights weak productivity and wage growth, and believes these factors will lead to a slower rise in household spending.

CBI director-general Carolyn Fairbairn meanwhile cited a possibility that uncertainty created by Prime Minister David Cameron’s promised referendum on the UK’s continuing membership of the European Union could ultimately hit investment.

She also noted concerns over the outlook for growth in China, and the knock-on effect on emerging markets, while emphasising the UK had limited direct exposure.

Ms Fairbairn said: “While there’s little current evidence of uncertainty negatively affecting business investment ahead of the EU referendum, this is a potential risk to the UK’s solid economic outlook, along with concerns over China and emerging markets.

“And despite domestic demand remaining healthy, it’s clear that increasing productivity remains a priority as a means of achieving sustainable wage growth.”

Scott Bowman, UK economist at consultancy Capital Economics, said of the industrial production figures: “Overall, 2015 was a poor year for manufacturing. And, despite survey evidence pointing to a bit of an improvement, the sector is still dealing with the appreciation of the pound from mid-2013 to mid-2015 and overseas demand remains subdued.”

“What’s more, the continued low oil prices and mild weather will probably weigh on the other areas of production. So a significant near-term improvement in industrial production doesn’t seem likely. Accordingly, the economy will continue to rely on the services sector to drive the recovery at the start of 2016.”