The CBI today warns that growth will remain “relatively lacklustre” for the next two years but says it no longer believes the UK economy will contract this year.
Although the organisation is predicting zero growth this year, that marks an upgrade from its previous forecast of a 0.3 per cent fall. It now expects growth of 1.4 per cent for 2013, up from 1.2 per cent, and as much as 2 per cent in 2014. However, it is worried that the continued uncertainty in the eurozone will knock confidence for some time to come.
Its latest forecast comes after official figures estimated a 1 per cent rise in GDP in the third quarter, ending the longest double-dip recession since the 1950s.
John Cridland, director general of the CBI, said: “Despite the better-than-expected third quarter performance, the UK economy has bumped along the bottom this year, with overall growth fairly flat.
“While we expect underlying momentum to pick up modestly next year and to be slightly stronger in 2014, the pace will remain relatively lacklustre.”
The CBI also warns that inflation is likely to be higher than previously forecast throughout 2013 as a result of rising utility prices, but expects inflation to be close to the 2 per cent target by the end next year because of subdued underlying growth.