The UK economy is likely to stage a recovery next spring, a forecast by a leading business group has said.
The employers' group, the CBI, has predicted that there will be economic growth in spring next year but said any recovery would be "slow and fragile".
It predicted the economy would shrink 3.9% this year but grow 0.2% in the second quarter of 2010.
Separately, a report from the Ernst & Young Item Club has predicted that the economy will shrink by 3.5% this year.
It forecast the economy would shrink by 0.1% in the whole of 2010.
Return to growth?
The CBI also said that the first quarter of this year had been "tougher than expected", leading it to revise its outlook.
Its prediction of a 3.9% contraction in the economy this year is significantly worse than the 3.3% it predicted in February.
"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," said Richard Lambert, director general of the CBI.
Budget forecasts
In Wednesday's Budget, Chancellor Alistair Darling is expected to predict economic contraction of about 3% of GDP this year - up from his earlier forecast in November of between 0.75% to 1.25%.
The Item Club believes that the revival of the bond market in January has enabled the UK's strongest companies to gain access to credit.
"This recession is unusual in terms of the degree of monetary and financial stimulus that has been applied," said Peter Spencer, chief economic adviser to the Item Club.
"That is why I believe the hopeful signs seen in recent weeks mark a turning point rather than the false dawn that appeared so cruelly in 1931."
The Item Club's forecast was also encouraged by improved sentiment emerging in business surveys in the US, China and the UK, it said.
However, it also said that the backdrop to the Budget is "bleak" and warned that the chancellor has "limited options" in his spending plans.
Job losses
Mr Spencer warned that the UK was not out of the woods yet.
"We face another 12 to 18 months of serious grief. Around 900,000 jobs will be lost this year and half a million next," he said.
He also predicted a gloomy next 12 months for the housing market and the high street.
World trade is expected to decline by 9% in 2009, he added.
Meanwhile, the British Chambers of Commerce has called for the chancellor to provide more support for private industry in the Budget.
The business group wants a freeze on the minimum wage and a cut in small businesses' corporation tax.
Source : bbc.co.uk Monday 20th April 2009
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