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Britain will not suffer double dip says CBI

By David Prosser

Published 14/06/2010

Britain is set to avoid a double-dip recession but faces a long and painful climb back to pre-downturn levels of growth because of unprecedented cuts in Government spending, the country's leading business organisation said today.

The CBI said it now expects Britain's economy to continue growing this year and next, but warned that the recovery would be "weak" and driven only by the private sector. The employers' group unveiled its latest forecasts for UK economic growth on the day that the Office of Budget Responsibility (OBR) is set to offer its prognosis for the future.

The OBR, set up by George Osborne last month, has prepared independent new growth forecasts, which the Chancellor will use as he frames the emergency Budget scheduled for a week tomorrow.

The CBI said it expects the UK economy to grow at a rate of 1.3% this year - which is slightly faster than the 1% forecast made in March, but in line with an existing Treasury projection that sees growth at 1 to 1.5%. In 2011, however, the CBI predicts the economy will grow 2.5%, while the Treasury has forecast 3.25%.

The OBR, headed by Sir Alan Budd, a former senior Treasury civil servant and a founding member of the Bank of England's Monetary Policy Committee, is expected to revise that Treasury figure down today, almost certainly to a level much more in line with the CBI's expectations. Even these are more optimistic than the consensus opinion of independent forecasters, who predict growth of 2.2% next year.

Capital Economics, the think tank, said this level of revision would mean the Government would face a sharply increased public sector borrowing requirement.

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