UK to avoid double dip, says CBI boss

THE leader of the CBI business lobby group warns in a New Year message of “bumpy times ahead” for British firms – but says the UK economy is likely to keep heading in the right direction.

Richard Lambert, the CBI’s director-general, said there was understandable uncertainty over prospects for 2011.

The pace of economic recovery could slow “quite markedly” in the first few months of the year as next month’s VAT increase took effect and the construction sector began to feel the impact of public spending cuts.

The positive impact of companies restocking after the recession may also start to wane, and the CBI believed that growth for the opening quarter of 2011 could go as low as 0.2%, against 0.7% in the third quarter of 2010.

“However, the latest CBI forecasts, which are pretty much in line with the consensus view, suggest that growth in private sector investment and trade will start to pick up in the second half of the year, and continue into 2012,” said Mr Lambert.

“That would bring GDP growth of 2% in 2011 and 2.4% the year after – not much to shout about, perhaps, at this stage of a recovery, but enough to keep unemployment under control and the public finances on track.

“This means that the CBI is not expecting a double-dip recession, or a dramatic surge in inflation and interest rates.

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“And it is forecasting that overall employment at the end of 2012 will be higher than it is today, with growth in the private sector more than offsetting job losses among public sector employees,” he added.