Group foresees recovery in British economy from early 2010

Britain's leading business group predicted on Monday that the country's economy would start real recovery from early next year.

The Confederation of British Industry (CBI), said modest growth should resume during the first three months of 2010, with the pace of growth gradually picking up during the year.

It said the country's GDP (gross domestic product), supported by low interest rates and quantitative easing, should flatten out during the second half of 2009.

"The world recession has deepened, so it is 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," Richard Lambert, CBI director-general said.

"The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behavior. For positive growth to return, lenders need to feel more confident so that credit can start flowing again," he said.

Lambert dismissed some optimistic views which took recent tentative indicators as evidence of "green shoots." He said: "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."

The CBI said it expected that by the end of the recession the economy would have shrunk by a cumulative 4.8 percent, not as severe as the 5.9 percent seen in the early 1980s, after five consecutive quarters of falling GDP.

It also foresaw very "slight" growth from the start of 2010, with the pace picking up slowly, so that growth rates would be restored only by the end of the year. For 2010 as a whole, this profile would yield an average annual GDP growth of a modest 0.7 percent following a fall this year in GDP of 3.9 percent.

Ian McCafferty, CBI chief economic advisor, said: "We still have some way to go before the UK economy is truly out of the woods and we see sustainable growth. For consumers, some of the worst fears of earlier in the year may now not be realized, but they will still face tough times as higher saving and lower income eat in to their ability to spend."

However, he said that the restraint shown by businesses and their staff in setting pay awards and accepting reduced working hours should help to curb the pace of job losses, lessening the pain for some.