Britain's economic recovery will remain fragile until the middle of next year due to the withdrawal of stimulus measures, the Confederation of British Industry warned Monday. The end of emergency steps to combat the recession such as the reduction in Value-Added Tax (VAT) and a scheme that subsidises the cost of buying new vehicles would affect the speed at which the economy recovers, said the group.
"The economic outlook is improving, but the lack of a clear driver for growth will make for a bumpy ride in the months ahead," said Richard Lambert, director-general of the Confederation of British Industry (CBI). "The CBI expects the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year." Britain escaped from recession in the fourth quarter of last year with growth of 0.3 percent.
The expansion during October-December 2009 followed a deep recession that lasted six quarters: the longest on record in Britain. The CBI predicted economic growth of 0.3 percent and 0.4 percent in the first two quarters of 2010, followed by growth of 0.5 percent in the second half of the year.
Growth would then pick up during 2011, driven by strengthening global demand, consumer spending and business investment, forecast the employers' group. Overall, the CBI is predicting annual economic growth of 1.0 percent in 2010, rising to 2.5 percent in 2011. Lambert further urged the government to set out a "credible plan" to cut Britain's ballooning debt at a faster rate than currently envisaged. "To convince international investors that the spiralling budget deficit will not derail the economy, the government must set out a credible plan to balance the books by 2015/16, two years earlier than currently planned," he said.