Worst of recession may be over, no recovery until Spring 2010

20 April 2009

The UK recession deepened more than expected in the first three months of this year, but this should prove to have been the worst of the quarterly falls in GDP, and the recession is expected to moderate in the second half of 2009, the CBI said today

However, the recovery will be slow and fragile, with GDP growth resuming only in the spring of 2010.

Revealing its latest economic forecast, the CBI said that the world economy had worsened since its last forecast in February, with further falls in global industrial output and the financial crisis continuing to frustrate businesses and governments. It has therefore revised its GDP growth outlook for 2009 from -3.3% to -3.9%, reflecting a harsher quarter-on-quarter contraction of -1.8% for the first quarter (Q1) of 2009.

The UK's leading business organisation predicts however that, aided by aggressive monetary policy, a weaker pound, low inflation, and the fiscal support announced by many countries, the rate of UK GDP decline will slow through 2009 and make a fragile improvement to reach positive quarter-on-quarter growth of 0.2% in 2010 Q2.

Richard Lambert, CBI Director-General, said: "The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected. Firms have been running down their stocks of completed goods, and that is having a real impact on output, jobs and investment. Anxious consumers are spending less and building a savings buffer.

"In these turbulent times it is difficult to build a clear picture of how the economy will perform, but there are a few tentative signs that the steepest phase of the recession is now behind us, and that the banking packages, aggressive monetary policy and fiscal support will steady the pace of decline from here on. The recession is by no means over, but we see a return to very weak growth by spring 2010."