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Economic recovery on track says CBI

THE CBI sees the recovery in the UK economy staying on track, but warned it will be protracted as urgent action is taken to reduce the budget deficit.

The UK’s leading business group is forecasting slightly faster growth in 2010 after a strong pick-up in manufacturing activity.

In its latest economic forecast, the CBI predicts that the UK economy will grow by 1.3% in 2010, up from 1% in its previous March forecast.

The slight upward revision reflects the relative strength of the economy over recent months, with industrial production showing solid growth and overseas demand for UK-made goods strengthening, buoyed by the relative weakness of Sterling.

The GDP forecast for 2011 remains unchanged at 2.5%. Looking at quarter-on-quarter growth: after posting first-quarter growth of 0.3% this year, the CBI expects the economy to grow by 0.8% in the second quarter, followed by slower rates of 0.5% and 0.4% in the latter half of 2010. Quarterly growth is then forecast to pick up slightly from 0.6% to 0.8% over the course of 201

However, the outlook remains uncertain, particularly with government spending expected to fall sharply, as much-needed steps to restore the public finances are taken in the forthcoming emergency Budget.

Richard Lambert, CBI director-general, said: “Over the last three months the political and economic backdrop at home and abroad has shifted dramatically. Turbulence has returned to global financial markets as concerns about European sovereign debts have intensified, underlining the need for the UK to tackle its large budget deficit urgently.

“Although the risks to the economic outlook have increased, our view is that the UK’s tentative recovery will be sustained. However, economic growth will be weak and we do not expect a return to pre-recession GDP levels until 2012.

“It is clear that the private sector will have to be the main driver of economic growth to offset lower government spending. It is therefore essential that next week’s emergency Budget creates the right conditions for businesses to drive growth and create new jobs, as well as setting out bold action to repair the public finances.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .