The UK economy will come out of recession by the end of 2009, but growth is unlikely to have returned to pre-recession levels by the end of 2011, according to new year predictions from the CBI.
Its latest economic forecast predicts that the recession will end when UK growth resumes in the fourth quarter of this year, helped by consumers bringing their spending forward to beat the VAT rise.
However, subsequent growth in the first two quarters of 2010 is expected to be weak at 0.3%, before strengthening as the global economic recovery gathers pace, businesses rebuild stocks and household spending recovers.
Growth in the range of 0.5% to 0.7% is expected to be maintained until the end of 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 John Cridland, CBI deputy director-general.
Meanwhile, unemployment is expected to continue rising over the coming months, peaking at just over 2.8 million in the third quarter of next year.
The planned VAT rise in January is predicted to push CPI inflation up sharply before easing back to fall below the Bank of England's 2% target throughout 2011.
To minimise the risk of inflationary pressures, it is thought base rate will start rising in spring 2010, and could reach 2% by the end of next year.
Compare savings accounts
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
Moneyfacts.co.uk will, like most other websites, place cookies onto your computer’s
hard drive. This includes tracking cookies.