No strong recovery for some time yet, warns CBI

Despite a squeeze on household income, and public spending cuts, the CBI expects this year’s GDP growth rate to be 1.7 per cent – marginally lower than the previous forecast of 1.8 per cent. Growth of 2.2 per cent is expected in 2012; down slightly from February’s forecast of 2.3 per cent.

Stronger net exports are expected to make an important contribution to the UK economy both this year and next, while business investment is also expected to help drive economic growth. Survey evidence shows historically strong investment intentions, with growth of 8.8 per cent in 2011 and 8.7 per cent in 2012 forecast.

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“Although there are a number of risks to the UK’s economic outlook, we continue to expect that the recovery will make further headway this year and next, but the pace will be sluggish,” said John Cridland, the CBI’s director general. “The economy is battling headwinds of squeezed household budgets, weak wage growth, high inflation and necessary public spending cuts. Concerns also remain over the volatility of oil prices, and the impact of the earthquake in Japan on UK supply chains.

“But there are some brighter spots in the forecast. Global economic conditions remain upbeat, and we expect to see a stronger performance by UK exporters. Business investment will also make a firm contribution to growth in 2011 and 2012. But the rebalancing of the economy is going to take time to feed through, and domestically it may not feel like much of a recovery for some time yet.”

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