The British economy is stabilizing, but growth will not return until the beginning of next year and will then be slow, the country’s leading business lobby group said yesterday.
In its latest forecast, the CBI said GDP would likely flatten out during the second half of this year.
“The UK economy is stabilizing, with the worst of the quarterly falls in GDP behind us, but it will take until the beginning of next year before we see a return to growth,” it said, adding that growth would be “modest.”
It said the economy would retract by 0.1 percent in the third quarter of this year, zero percent in the fourth and grow by 0.1 percent and 0.3 percent in the first two quarters of next year.
“The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behavior,” CBI director general Richard Lambert said.
He said that some analysts had begun to speak of “green shoots” in the recession-hit economy, including the National Institute of Economic and Social Research, which said that GDP grew in April, but expressed caution.
“It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth and, in the meantime, the government must do everything it can to help firms get access to credit,” he said.
The CBI forecast that by the end of the recession, the UK’s economy would have shrunk by a cumulative 4.8 percent, including 3.9 percent this year, after five successive quarters of retraction.
This was not as severe as the recession of the early 1980s, when GDP fell by a cumulative 5.9 percent, it said, and predicted growth of 0.7 percent next year.
The group said Britain’s labor market was proving to be “even more flexible than hoped,” with private sector employees accepting wage freezes and short-time working and said this would limit job losses this year.
Yet unemployment is still likely to continue rising to a peak of 3.03 million or 9.6 percent in the second quarter of next year.