UK economy stabilising but recovery will be slow warns CBI

Kay Mitchell | | 0 Comments

Britain’s largest employers’ group, the CBI, has warned today that even though Britain’s economy is showing signs of stability, recovery will not be until early 2010.

According to the organisation, the economy will shrink by 3.9% over the course of this year before seeing a return to growth of 0.7% in 2010.

CBI director general Richard Lambert comments: “The harshest period of the recession looks to be behind us.”

However, Mr Lambert cautions that “the return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour.

For positive growth to return, lenders need to feel more confident so that credit can start flowing again,“ he added.

The news comes after the weekend’s meeting for the Group of Eight (G8) industrialised nations who acknowledged that there are signs of stabilisation in the world’s leading economies.

G8 ministers said stock markets were rising, interest rates more stable, and consumer confidence was returning.

However, finance ministers reluctantly admitted that the global situation still “remains uncertain” and the world’s largest economies still face major risks.

In the meantime, last week the influential think tank, the National Institute of Economic and Social Research (NIESR), said the UK’s economy grew in May by 0.1% and follows a similar rise in the previous month and was the first growth in a year.

Martin Weale, director of NIESR, said that he expected the next set of official GDP figures to show “either that the recession is over or that it is close to over”.

However, Mr Lambert of the CBI said “Some commentators have been carried away by recent tentative indicators as evidence of ‘green shoots’.”

The CBI is forecasting GDP to fall by 0.1% in the third quarter of this year and to be flat during the final quarter of 2009.

However, the group expects modest growth to resume in 2010, with the economy growing by 0.1% in the first three months and by 0.3% in the second quarter.

Finally, the CBI expects the overall decline in the economy will be around 4.8% – less than the total 5.9% decline experienced in the recession of the early 1980s.

Tags: CBI, Economy News, G8, GDP, National Institute of Economic and Social Research, NIESR, recession, recovery, slow, stable