UK’s recovery slower than predicted

The UK’s economy will recover more
slowly than previously thought next year, business group the CBI has predicted.

It expects GDP to grow by 2 per
cent in 2011, not 2.5 per cent as forecast in June this year.

Spending cuts aimed at getting
public finances into better shape had prompted the revision, the CBI added.

But it said the prospect of the UK
returning to recession was “unlikely”, adding it expected growth in
2010 to be higher than previously thought.

It also said that the outlook for
consumer spending next year was weaker than previously predicted, hit by
stubbornly high inflation, in part from January’s VAT rise to 20 per cent,
along with only modest wage increases.

Official figures from the Office
for National Statistics have shown that the UK economy grew by 0.3 per cent and
1.2 per cent in the first two quarters of 2010 respectively.

The CBI expects the economy to grow
by 0.3 per cent and 0.6 per cent in the latter two quarters of the year.

Quarterly growth is then forecast
to pick up gradually from 0.3 per cent to 0.6 per cent over the course of 2011.

And looking ahead to spending cuts
to be announced in next month’s comprehensive spending review, CBI chief
economic adviser Ian McCafferty said “the action to get the public
finances back onto a sustainable footing will no doubt temper the recovery
going into 2011”.

The group also said that it no
longer expected unemployment to peak in the period to the end of 2011, but that
it would instead rise at a more gradual rate, climbing from a predicted 2.49
million at the end of this year to 2.62 million at the end of 2011. The latest
data put unemployment at 2.47 million.

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