UK set for low growth until 2012
Britain's economy will grow at a sluggish pace this year and pick up only modestly in 2012 as consumers scale back spending and uncertainties about the global recovery weigh on businesses' sentiment, the CBI predicted today.
The lobby group, representing 240,000 businesses, cut its growth forecast for this year to 1.3 percent from 1.7 percent, saying growth should accelerate to 2.2 percent next year.
"Economic conditions will be very tough for the rest of this year as household budgets continue to be squeezed by a combination of inflation and weak wage growth," said CBI chief economic adviser Ian McCafferty.
"But conditions will be a little brighter in 2012 as inflation eases back and take-home pay improves," he said.
Britain's economy barely grew between April and June and business surveys have indicated manufacturers are facing a slowdown, banks are keeping credit tight as they repair their balance sheets and consumers are suffering the worst squeeze in income for 30 years on the back of soaring food and fuel prices, higher taxes and slow wage increases.
The CBI said quarterly growth should rebound to 0.8 percent in the third quarter as the meagre rate of 0.2 percent in the second quarter was mainly due to one-off factors.
The organisation expects the Bank of England to raise its key interest rate from the current record low of 0.5 percent in the first three months of 2012.
The CBI expected wages to grow by 2.3 percent and 2.5 percent in the two remaining quarters of 2011 and predicts wage increases of 2.9 percent for 2012.
