The UK’s economy will return to growth in the second half of this year, a leading business lobbying organisation has said.
The reassurance has come from the CBI, which has also predicted that the speed of economic growth in the UK will increase next year.
It is a positive prediction, which flies in the face of some pessimistic forecasts from the finance and business industry.
But despite the positive projection for the latter stages of this year, the CBI reduced its forecast for overall GDP growth for 2012 as a whole.
The business group had previous GDP growth of 0.9% for the year, but has reduced this prediction to 0.6% – following the economic figures for the first quarter of 2012 from the Office for National Statistics (ONS).
The ONS said last month that GDP in Britain was down 0.2% in the first quarter of this year, meaning the UK is now technically back in recession.
“Despite the disappointing GDP estimate for the first quarter from the ONS, we still think the UK economy will grow in 2012, with faster growth next year,” said John Cridland, Director-General of the CBI.
“Optimism among businesses has been increasing since the turn of the year, with manufacturing demand holding up. And that is beginning to translate into more jobs and investment.”
The CBI has said that quarter-on-quarter growth is expected to be flat in the second quarter of this year, as the extra bank holiday for the Queen’s Diamond Jubilee reduces economic activity.
However, the business group predicts that growth will improve in the second half of the year, as a result of global economic recovery and a moderate boost from the Olympics.
While improvements in the global economy will benefit the UK economy, the CBI has said that it still poses a threat to economic recovery.
“The global economy continues to pose a number of significant challenges. Concerns over Eurozone stability are on the rise again, oil prices remain high and confidence among businesses and households are still fragile,” added Mr Cridland.
“We have always said that the path back to sustainable economic growth will be a long and difficult one, with many bumps along the way. To re-balance our economy towards exports and investment will take time and patience.”
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