While the near-term prospects for the British economy are recovering, growth will be fragile going into 2010, according to the CBI.
In its latest economic forecast, the CBI predicts that British GDP will post quarter-on-quarter growth of 0.3% in the third quarter of this year, rising up to 0.4% in the fourth quarter. This is because it says consumers will bring their spending forward in advance of the Value Added Tax (VAT) increase in January.
However, it adds that this will have the effect of dampening growth in early 2010. Consequently it says next year will start with growth of only 0.1% in the first quarter, and 0.3% in the second quarter.
Following a forecast fall of 4.3% for 2009, the CBI predicts the British economy will expand by 0.9% in 2010.
The report notes: “While the UK economy will be in recovery mode as activity continues to grow, output levels are expected to rise only slowly against the backdrop of an extremely severe recession (the most recent cumulative 5.5% output loss is close to that of the early 1980s recession). Consequently the economic climate next year is still likely to feel difficult.”