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CBI warns of 'slow' recovery

Although the worst of the recession is behind us, the return to growth is likely to be ‘slow and gradual,’ according to the UK’s leading business organisation, CBI.

The UK economy is said to be stabilising, and the recent growth in GDP shows the worst of the recession has passed according to CBI. It is thought the modest growth will continue in the first three months of 2010.

With low interest rates and help from quantitative easing it is hoped that 2010 as a whole will yield a 0.7% growth, compared to a 3.9% fall this year.

CBI Director-General Richard Lambert said: “The world recession has deepened, so it is not surprising that the UK economy has continued to suffer.

“However, the harshest period of the recession looks to be behind us, the economy is stabilising and this should continue during the second half of this year.

“The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour.

“For positive growth to return, lenders need to feel more confident so that credit can start flowing again.”

With consumer spending suffering from unemployment, more savings and modest pay increases, household consumption has shrunk by 2.9% in 2009, and is expected to grow by only 0.5% in 2010, according to CBI figures.

The flexibility of the labour market is said to be significant in the return to growth, with many more private sector employees accepting wage freezes than in previous downturns.

Ian McCafferty, CBI’s Chief Economic Adviser, said: “We still have some way to go before the UK economy is truly out of the woods and we see sustainable growth.

“For consumers, some of the worst fears of earlier in the year may now not be realised, but they will still face tough times as higher saving and lower income eat into their ability to spend.

“However, the restraint shown by businesses and their staff on setting pay awards and accepting short-time working should help curb the pace of job losses, lessening the pain for some, and shows the real strength of Britain’s flexible labour market.”

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