Britain facing slow growth in 2010

Tuesday, December 22, 2009
LONDON: Britain’s biggest employers’ organization said on Monday that the country’s economy would finally emerge from recession by the end of the year, but faces a “fragile path of slow growth” ahead.

The Confederation of British Industry (CBI) predicted that the British economy would grow by 0.5 percent in the final quarter of 2009, after six quarters of recession.

Britain is the last major world power mired in recession, official data showed last month. The CBI forecast growth of 1.2 percent next year and 2.5 percent in 2011. “The outlook is brightening as the global economy finds its feet, although we will need to keep our nerve during early 2010, and there is no sign of a clear driver of strong economic growth,” said CBI deputy director general John Cridland.

“In the spring, many staff will face another cycle of wage freezes and job losses will continue rising until the autumn.”The economy will be on a fragile path of slow growth and it remains vital

that the government sets out clearer plans to address the fiscal deficit at its next opportunity in order to help shore up future UK economic prospects.”

The CBI forecast that unemployment would continue to rise over the coming quarters, peaking at just over 2.8 million in the third quarter of 2010.

After constrained wage growth during 2009 and 2010, average earnings would rise somewhat faster over 2011, at 3.9 percent, it predicted.

“The UK economy faces a number of structural hurdles over the next two years, and this recovery will be relatively drawn out,” said Ian McCafferty, the CBI’s chief economic adviser.

“Credit conditions will remain difficult as the banks slowly nurse themselves back to health, consumer spending will be shaped by the need to

rebuild savings, and the public sector will soon have to tighten its belt. All three factors will act as headwinds to growth,” the adviser further said.

The CBI also predicts that interest rates will rise from their current record low of 0.5 percent to two percent by the end of 2010.