Economy stabilizes but no recovery until 2010

THE UK economy is stabilizing and the worst of the quarterly falls in GDP are now over, but it will take until the beginning of next year before the economy sees a return to growth, according to the Confederation of British Industry (CBI).

The UK’s leading business group expects modest growth to resume during the first three months of 2010, with the pace of growth gradually picking up during next year.

The CBI predicts that UK GDP, supported by low interest rates and quantitative easing, should flatten out during the second half of 2009, with quarter-on-quarter figures of –0.1% and 0% in the third and fourth quarters, and modest quarter-on-quarter growth of 0.1% and 0.3% in the first and second quarters of 2010.

Richard Lambert, director general of the CBI, said: ‘The world recession has deepened, so it’s 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 stabilizing and this should continue during the second half of this year.’

But he added that the return to growth is likely to be a slow and gradual one and warned that some commentators had been carried away by recent tentative indicators as evidence of ‘green shoots’.

‘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 says it expects that, by the end of the recession, the economy will have shrunk by a cumulative 4.8% – not as severe as the 5.9% seen in the early 1980s – after five consecutive quarters of falling GDP.