British economy will recover slowly in 2010

03-23-2010 07:24

Economists have forecasted that the British economy will recover slowly in 2010, two days before this week’s Budget. The Confederation of British Industry (CBI) stated that the economy will expand by 1% this year, while the economic revival will remain restrained until mid 2011.

ITEM club

In the meantime, ITEM club economists cautioned that the chancellor’s predictions were too bullish. The government’s projections show a 1.25% growth for 2010 and a 3.5% expansion for next year.
Nevertheless, Alistair Darling, Chancellor of the Exchequer, HM Treasury, may adjust those estimations in this week’s Budget.

Consumer spending

“The government’s forecasts for the next years are too optimistic, based on a notable recovery in consumer spending, which is unlikely to happen,” according to Peter Spencer, ITEM’s chief economic advisor.

Confederation of British Industry

The economy will expand by 2.5% next year, according to the Confederation of British Industry. CBI leader Richard Lambert said: “The economic prospects are progressing, but this year’s recovery will be instable due to a lack of concrete impulses for expansion. We forecast that the economy will recover sluggish and slow this year, with few indications for a strong pick-up until the middle of 2011.”

Budget deficit

The Ernst & Young ITEM Club and the CBI requested more information about the government’s plans to reduce the budget deficit in the next years. The borrowing that is needed to close the budget gap will probably be less than the €179 billion forecasted by the Chancellor in the pre-Budget report of 2009.

British economic outlook

Alistair Darling may effect economies up to €25 billion in the next five years to solve the budget deficit problems without affecting the British economic outlook. The Confederation of British Industry required a ‘realistic plan’ to create budget balance in 2016 in order to restore confidence among global investors.

Budget

Last Sunday, the Chancellor of the Exchequer restated that Wednesday’s Budget would not feature any ‘presents’. “This is a very bad period for presents. Everybody understands very well that we have to reduce borrowing and guarantee that the economy improves.”