'Slow recovery' expected in 2010

The worst is behind us, but it will be next year before the UK sees any GDP growth, business leaders have warned.

In its latest forecast, the Confederation of British Industry (CBI) predicts that GDP will have shrunk by 4.8% over five consecutive months before stabilising in 2010 with "modest" growth.

And while the National Institute of Economic and Social Research (NIESR) last week predicted that GDP will grow by 0.9% in 2010, the CBI was less optimistic.

The group said that the return to growth would be "slow and gradual".

It expects GDP to rise by 0.1% and 0.3% in the first and second quarter of 2010, before flattening out to 0.1% and 0% at the back end of the year, as the effects of low interest rates and quantitative easing become more evident.

Richard Lambert, CBI director-general, warned people not to put too much faith in 'green shoots' talk and blamed the sluggish pace of recovery on difficult credit conditions.

"Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots'," he said.

"It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth and, in the meantime, the Government must do everything it can to help firms get access to credit."

However, Lambert said that the labour market had proved "more flexible than hoped" during the recession, limiting the number of expected job losses.

The CBI predicts that unemployment will peak at 9.6% in the second quarter of 2010 - eclipsing the 3 million mark - before easing in the second half of the year, while the NIESR expects that the rate will grow at a slower pace, peaking at 9.6% in 2011.