Page last updated at 07:34 GMT, Monday, 22 March 2010

UK economy set for 'sluggish recovery'

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Economists are worried about slow growth in consumer spending

Economists have warned of a "sluggish" recovery in the UK economy this year, two days ahead of this week's Budget.

Industry body the CBI said it expected the economy to grow by 1% in 2010, with the recovery remaining subdued until the middle of next year.

Meanwhile economists at the Ernst & Young ITEM Club warned that the government's current forecasts for growth were too optimistic.

The government forecasts growth of 1.25% this year and 3.5% for 2011.

However the Chancellor, Alistair Darling, may revise those predictions in this week's Budget.

"[The chancellor's] projections for future years are too bullish - based on a strong pick-up in consumer spending that is unlikely to materialise," said Peter Spencer, chief economic adviser to the ITEM Club.

Deficit concerns

The CBI said it expected the economy to grow by 2.5% in 2011.

"The economic outlook is improving, but the lack of a clear drivers for growth will make for a bumpy ride in the months ahead," commented Richard Lambert, director general of the CBI.

"[We expect] the recovery in 2010 to be slow and sluggish, with few signs of real strength until well into next year."

Both the CBI and the ITEM Club called for more detail on the government's plans to cut the close the deficit in the budget over the coming years.

The borrowing required to fill the deficit is now expected to be less than the £178bn predicted by Mr Darling in the pre-Budget report last year.

The ITEM Club said that the chancellor could make cuts totalling £25bn over the next five years in order to tackle the budget deficit without damaging the UK's economic prospects.

The CBI called for a "credible plan" to balance the budget by 2016 in order to reassure international investors.

On Sunday the chancellor repeated his warning that there would be "no giveaways" in Wednesday's budget.

"The mood of the times is not for giveaways," he told the BBC.

"People are not daft, they know perfectly well that we need to get borrowing down and secure [economic] recovery."

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