British businesses say no economic growth until 2010

By AFP

July 15, 2010 Updated Jun 14, 2009 at 9:41 PM CDT

The British economy is stabilising but growth will not return until the beginning of 2010, and then it will still be slow, the country's leading business lobby group said Monday.

In its latest forecast, the CBI said gross domestic product (GDP) would likely flatten out during the second half of 2009.

"The UK economy is stabilising, with the worst of the quarterly falls in GDP behind us, but it will take until the beginning of next year before we see a return to growth," it said, adding that this growth will be "modest".

It predicted the economy would retract by 0.1 percent in the third quarter of this year, zero percent in the fourth, and grow by 0.1 percent and 0.3 percent in the first two quarters of 2010.

"The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour," said CBI director general Richard Lambert.

He noted some analysts had begun to speak of "green shoots" in the recession-hit economy, including the National Institute of Economic and Social Research (NIESR) which said that GDP grew in April, but expressed caution.

"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 forecast that by the end of the recession, Britain's economy will have shrunk by a cumulative 4.8 percent, including 3.9 percent this year, after five successive quarters of retraction.

This is not as severe as the recession of the early 1980s, when GDP fell by a cumulative 5.9 percent, it said, and predicted growth of 0.7 percent in 2010.

The business group said Britain's labour market was proving to be "even more flexible than hoped", with private sector employees accepting wage freezes and short-time working, and said this would limit job losses this year.

Yet unemployment is still likely to continue rising to a peak of 3.03 million or 9.6 percent in the second quarter of 2010.

On public finances, the CBI estimated that net borrowing will reach 12.2 percent of GDP in 2009-2010 financial year and 12.6 percent the following year.

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