UK set to take tentative steps out of recession

Posted on 22 Sep 2009 by The Manufacturer

The Confederation of British Industry (CBI) says the UK will emerge from recession with humble growth in quarters 3 and 4 of this year but the organisation is warning that recovery next year will be fragile.

The CBI says the UK will post 0.3 per cent quarter on quarter growth from July to September and 0.4 per cent growth for the October to December period. That will bring to UK GDP to recede by 4.3 per cent overall this year before growing by 0.9 per cent in 2010. The growth this quarter will bring to and end five straight quarters of contraction.

The organisation expects the weak value of sterling will finally provide some consolation next year by making UK goods more appealing to foreign markets and pushing exports up by 1.7 per cent in 2010.

But CBI director-general Richard Lambert said that though growth enabled by quantitative easing, a weak pound and a recovering global economy is likely to see the UK move out of recession this quarter, “it is difficult to see where demand growth will come from”.

“Firms that have run down their stocks will now be starting to raise output to meet demand, and consumers are likely to bring forward spending before VAT rises,” he conceded, “but once these two boosts are out of the way there is no clear driver of robust economic growth into 2010.”

He also said a fall in business investment which is expected to be down 17.7 per cent for the year “is a real concern”, the effects of which, along with poor public finance books, could be felt for years.

Employment prospects remain bleak despite the recovery indicators and the CBI says it expects unemployment to peak at around three million out of work in quarter two next year.