CBI: 2012 before economy fully recovers

The CBI sees the recovery in the UK economy staying on track, but warned it will be protracted as urgent action is taken to reduce the budget deficit.

The UK’s leading business group is forecasting slightly faster growth in 2010 after a strong pick-up in manufacturing activity.

In its latest economic forecast, it predicts that the UK economy will grow by 1.3 per cent in 2010, up from 1 per cent in its previous March forecast. The slight upward revision reflects the relative strength of the economy over recent months, with industrial production showing solid growth and overseas demand for UK-made goods strengthening, buoyed by the relative weakness of Sterling.

The GDP forecast for 2011 remains unchanged at 2.5 per cent.

Richard Lambert, CBI Director-General, said: “Over the last three months the political and economic backdrop at home and abroad has shifted dramatically. Turbulence has returned to global financial markets as concerns about European sovereign debts have intensified, underlining the need for the UK to tackle its large budget deficit urgently.

“Although the risks to the economic outlook have increased, our view is that the UK’s tentative recovery will be sustained. However, economic growth will be weak and we do not expect a return to pre-recession GDP levels until 2012."

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