UK Recovery to be 'Sluggish'

Economists are predicting that the recovery in the UK economy this year will be ‘sluggish.’

The recovery is expected to be subdued until at least the middle of next, whilst it will grow around 1% this year, according to industry body CBI.

Furthermore, economists at the Ernst and Young ITEM Club have criticised the government’s forecasts for the economy, branding them too optimistic.  The government is forecasting a growth of 1.25% this year, progressing onto 3.5% in 2011.

These forecasts may be revised however by Chancellor, Alistair Darling, in this week’s budget.

"[The chancellor's] projections for future years are too bullish - based on a strong pick-up in consumer spending that is unlikely to materialise," said Peter Spencer, chief economic adviser to the ITEM Club.

Meanwhile, CBI have said that they expect the economy to grow by 2.5% next year.

"The economic outlook is improving, but the lack of a clear drivers for growth will make for a bumpy ride in the months ahead," commented Richard Lambert, director general of the CBI.

"[We expect] the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year."

Both of these groups have now called for more detail to be given in coming years regarding the government’s plans to cut the deficit in the budget.

In order to fill the deficit, the borrowing required is expected to be less than the originally predicted £178bn, the figure that Darling set down in last year’s pre-Budget report.

According to the ITEM club, Darling has the capacity to make a total of £25bn in cuts over the next five years in order to tackle the budget deficit without impacting upon the UK’s economic prospects.

The CBI called for a "credible plan" to balance the budget by 2016 in order to reassure international investors.

On Sunday the chancellor repeated his warning that there would be "no giveaways" in Wednesday's budget.

"The mood of the times is not for giveaways," he told the BBC.

"People are not daft, they know perfectly well that we need to get borrowing down and secure [economic] recovery."

Posted at 04:10PM Mar 22, 2010 by Marc Stenton in The Economy  |  Comments[0]