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UK — CBI predicts wage freezes and further job losses for 2010

22 December 2009

The latest economic forecast by employer organisation 'Confederation of British Industry' (CBI) predicts that the recession will end when UK growth resumes in the fourth quarter of this year (0.5% quarter-on-quarter), helped by consumers bringing their spending forward to beat the VAT rise.

Subsequent growth in the first two quarters of 2010 will be weak at 0.3%, but this should strengthen as the global economic recovery gathers pace, businesses rebuild stocks and household spending recovers. Growth in the range of 0.5% to 0.7% is expected to be maintained through to the end of 2011.

As a result, the UK’s leading business organisation predicts annual UK GDP growth of 2.5% in 2011, following 1.2% in 2010. However, despite two years of economic expansion, UK GDP will still not have returned to its pre-recession level by the end of 2011, which illustrates the depth of the recession and the weakness of the economic recovery.

John Cridland, CBI Deputy Director-General, said "the outlook is brightening as the global economy finds its feet, although we will need to keep our nerve during early 2010, and there is no sign of a clear driver of strong economic growth. In the spring many staff will face another cycle of wage freezes, and job losses will continue rising until the autumn."

"Although the first few months of 2010 will be difficult, growth will gradually pick up and increasing confidence and demand will lead the UK into a more positive 2011. Consumer spending looks to be slightly more resilient than we first thought, and a weaker pound will help to support export growth."

"However, the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis. And it remains vital that government sets out clearer plans to address the fiscal deficit at its next opportunity in order to help shore up future UK economic prospects."

Unemployment is expected to continue rising over the coming quarters, but peaking slightly lower than previously forecast, at just over 2.8m in 2010 Q3. And after very constrained wage growth during 2009 and 2010, average earnings are expected to rise somewhat faster over 2011, at 3.9%.
These forecasts are more optimistic than our predictions at SIA, which you can read here if you are a member.



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