(RTTNews) - The UK economy will grow just 0.2% in the first three months of 2011 as public sector job cuts and a rise in the Value Added Tax rate slow the recovery, the Confederation of British Industry said on Monday.Government spending cuts and hike in the VAT rate to 20% from January will hurt consumer spending, the CBI said.
Growth is then expected to pick up to 0.4% in the second quarter followed by a 0.5% expansion in the third and fourth quarters each to take overall annual growth to 2%.
The CBI forecast UK growth to accelerate to 2.4% in 2012, which it said was "rather subdued" for the third year of a recovery.
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UK Growth To Be Sluggish Next Quarter, CBI Says
(RTTNews) - The UK economy will grow just 0.2% in the first three months of 2011 as public sector job cuts and a rise in the Value Added Tax rate slow the recovery, the Confederation of British Industry said on Monday.
That represents a downgrade on the CBI's previous forecast for 0.3% growth for the January-March period, although the industry body does not expect the UK economy to fall back into recession.
Government spending cuts and hike in the VAT rate to 20% from January will hurt consumer spending, the CBI said.
Growth is then expected to pick up to 0.4% in the second quarter followed by a 0.5% expansion in the third and fourth quarters each to take overall annual growth to 2%.
The CBI forecast UK growth to accelerate to 2.4% in 2012, which it said was "rather subdued" for the third year of a recovery.
CBI chief economic adviser Ian McCafferty said: "The big early kicker to growth from the turn in the inventory cycle has already passed and we are now starting to feel the impact of lower government spending.
"As a result, quarterly growth at the start of 2011 is likely to be very sluggish, although we do expect the recovery itself to stay on track.
"What is striking is how little we see growth accelerating in 2012. Typically, by the third year of a recovery, growth would be more robust than we expect for either 2011 or 2012."
The CBI forecast inflation to stay above the Bank of England's 2% target throughout 2011, pushed up by higher energy and commodity prices and the higher VAT, before easing to 2.4% at the end of 2012.
UK inflation has been above the central bank's target for a year, coming in at 3.3% in November. The CBI expects the Bank of England to begin normalize monetary policy in the spring, with the bank rate projected to end 2012 at 2.75%.
The UK economy has recovered at a faster than expected pace in 2010, recording quarterly growth rates of 1.2% and 0.8% in the second and third quarters respectively.
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