CBI warns of protracted economic recovery

The CBI has said UK economic recovery is on track but will be protracted.

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.

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 2011.

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.