The UK economy is expected to continue to grow but the pace will become sluggish next year as the government’s emergency budget deficit measures kick in, according to the CBI.
Consumer spending next year is forecast to be weaker as households will have less disposable income due to a VAT rise and modest wage increases.
The CBI’s latest economic forecast predicts the UK economy will grow by 1.6% in 2010, up from 1.3% in the previous June forecast. The upward revision reflects better than expected growth in the second quarter as companies began rebuilding their stocks.
The 2011 GDP forecast has been revised down to 2% from 2.5% due to the government additional fiscal consolidation measures.
The CBI expects the economy to grow by 0.3% and 0.6% in the latter two quarters of 2010, having achieved 0.3% and 1.2% in the first half.
“The action to get the public finances back onto a sustainable footing will no doubt temper the recovery going into 2011,” said Ian McCafferty, CBI chief economic adviser.
