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CBI says UK will avoid double dip recession Business groups offer mixed news on recovery hopes
(about 7 hours later)
Britain will avoid a double dip recession and modest growth should restart later this year, according to business lobby group the CBI. The CBI has predicted the UK will avoid a double dip recession, but two other surveys suggest the economy may worsen.
In its latest economic forecast, the employers' organisation expects growth of 0.9% in 2012 and 2% next year. The employers' organisation, the CBI, said it expected growth of 0.9% in 2012 and 2% next year.
It also says companies are starting to invest in new equipment and in finding new export markets. However, a separate survey from services firm BDO suggests company turnover continues to fall, indicating a recession is likely.
Consumers and households face a subdued outlook due to high unemployment and squeezed living standards, it adds. And the Chartered Institute of Personnel and Development (CIPD) found employers more likely to lay off staff.
The CBI thinks the UK will avoid an official recession - two quarters of declines in a row - by bouncing back from its 0.2% fall in the last three months of 2011 to growth of 0.2% in the first quarter of 2012. The CBI published its predictions in its regular economic forecast.
It predicts another 0.2% rise in the second quarter of this year before speeding up a little later in 2012. It found companies were starting to invest in new equipment and in finding new export markets.
Weak wage growth The lobby group believes the manufacturing sector will expand this year as exporters invest in new equipment.
CBI director general John Cridland said: "Economic conditions will continue to be tough, especially in the first half of the year and the UK recovery will depend on the successful resolution of the eurozone crisis. It thinks the UK will avoid an official recession - two quarters of declining output in a row - by bouncing back from its 0.2% fall in the last three months of 2011 to growth of 0.2% in the first quarter of 2012.
"The pressure on household incomes will also ease slightly in the second half of this year as inflation falls, resulting in a slight increase in consumer spending. Turnover falls
"But weak wage growth and high levels of unemployment will continue to be a brake on household spending." However, the BDO survey of companies' turnover found it had fallen for the eighth month in a row.
The lobby group believes the manufacturing sector will expand this year as exporters find new markets and invest in new equipment. The BDO's output index fell to 91.2 in January from 91.4 in December, where any figure below 95 indicates contraction.
And it said it was encouraged by cash injections from the European Central Bank and core eurozone countries were seeing signs of stabilisation. "Undoubtedly, prospects for growth continue to be fragile - as the UK has already very likely entered a technical recession and the situation in the eurozone remains difficult to predict," said BDO partner Peter Hemington.
Unemployment
The CBI also warned that the economy would remain difficult.
"Economic conditions will continue to be tough, especially in the first half of the year and the UK recovery will depend on the successful resolution of the eurozone crisis," said director general John Cridland.
"Weak wage growth and high levels of unemployment will continue to be a brake on household spending."
A survey of 1,000 employers by the CIPD found the difference between the number of employers planning on bringing in new staff and those planning on cutting staff had widened to its highest level since 2009.
The survey fell to -8 from -3, with any number below zero indicating more employers laying off workers.
"Whereas employers were in wait-and-see mode three months ago, more private sector firms, particularly among private sector services firms, have decided to push the redundancy button in response to worsening economic news," said Gerwyn Davies, public policy advisor at the CIPD.
The body warned unemployment could reach 2.85 million unless economic conditions improved.