CBI Says Sluggish Growth
Employers’ group the CBI has warned that UK economic recovery will remain sluggish throughout 2010 and will not show much marked improvement until the middle of 2011.
It bases this pessimistic view, outlined in its latest economic forecast, on a fragility not helped by certain stimulus packages, including the car scrappage scheme and the VAT cut, coming to an end. And as people continue to worry about their jobs, this will also hold back consumer spending, adding to the woes.
The CBI growth forecast for the UK GDP in 2010 is 1%, followed by a significant rise to 2.5% in 2011 although, this will still not return the economy to where it was prior to the recession. Fuelling the better recovery in 2011 will be increased global demand and consumer spending, and better levels of business investment.
Richard Lambert, Director-General of the CBI, said:
“The economic outlook is improving, but the lack of a clear driver for growth will make for a bumpy ride in the months ahead. The CBI expects the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year.
“To convince international investors that the spiralling budget deficit will not derail the economy, the Government must set out a credible plan to balance the books by 2015-16, two years earlier than currently planned.
“It must also avoid damaging tax rises. Targeted spending cuts and smart re-engineering of public services can preserve front line services and deliver the savings that will have to be made. At the same time, it is vital that business has the space to grow, invest and create new jobs. That’s the only way out of our current fiscal mess.”
But whereas unemployment remains a worry for people and economists alike, the CBI expects inflation to fall back below the Bank of England’s target by the end of 2010.
Ian McCafferty, the CBI’s Chief Economic Adviser, said:
“The state of the public finances means this recovery will be led by the UK consumer, private sector investment and the re-building of stocks. But headwinds from tight credit conditions and the desire to borrow less and pay down debt will hold this back somewhat.
“After peaking in the autumn, unemployment will come down very gradually next year. With inflation likely to fall back quite sharply due to the large amount of spare capacity in the economy, monetary policy will remain easy, though the Bank is expected to move away from the current emergency 0.5% rate later this year.”
Guest Article by Neil Camp
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My name is Alan Potts and I'm the Editor of the BUYability web site and Managing Director of BUYability Limited. You can connect with me or keep up to date with new posts on this blog via the following social media sites: 
