Recession recovery to start this time next year

20 April 2009 / by Rebecca Sargent
The worst of the recession has passed, and recovery is expected this time next year, analysis from the CBI has revealed.

According to the 'voice of business', the UK recession deepened more than expected in the first quarter of 2009, but the worst has now passed and the recession is expected to moderate in the second half of 2009, before recovery starts in Spring 2010.

According to the CBI, the worse than expected growth decline in the UK is a result of aggressive monetary policy, a weaker pound, low inflation and the announcement of worldwide fiscal stimulus.

Commenting, 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."

Speaking about the Budget, which is due to be announced later this week, Mr Lambert added: "Given falling tax revenues, the shrinking economy, and alarming levels of government debt, we urge the Chancellor to avoid any further major fiscal boosts in the Budget. Budget measures should be targeted on jobs and investment, with a focus on efficiency savings and public service reform."

Overall the CBI predicts that the economy will have shrunk by a total of 5.1 per cent by the end of the recession – which is less than the 5.9 per cent fall seen during the 1980s recession.

Commenting on the data, Liberal Democrat shadow chancellor Vince Cable said: "All we can sensibly discuss is what is actually happening. That is unemployment growing rapidly, more and more families struggling to pay their mortgages, the growth of negative equity and an unrelenting budget deficit."

Mr Cable, added: "We are undoubtedly in the middle of a major economic crisis, compounded by the reluctance of banks to lend. No amount of spinning by Government can avoid these simple brutal economic facts which the budget has to address."

The Chancellor is expected to announce the Budget on Wednesday.

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