British economic recovery set to slow

News Article - 17 January 2011
Category: Business

According to the Confederation of British Industry (CBI), British economic recovery will slow to a snail's pace at the beginning of 2011. However, the risk of a double dip recession remains low.

The CBI predicts that growth in the first quarter of the year will be 0.2 per cent year on year. For the whole of 2011, the organisation expects growth of 2 per cent, followed by a more substantial 2.4 per cent in 2012. This latter increase has been described by the CBI as 'subdued for this stage of the recovery.'

Ian McCafferty, chief economic adviser for the CBI, "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."

Employment is also set to increase to 2.6m over the course of 2011 with a fall back to 2.5m - the current level - by the end of 2012. Bank of England interest rates are to be increased gradually between now and the end of 2012, at which point they are expected to be around the 2.75 per cent mark.

The economy will, however, benefit from positive export growth which is expected to be around 6.9 per cent and 8 per cent respectively over the next two years. The CBI also expects business investment to grow in 2011 and 2012, by around 7 per cent and 8.5 per cent respectively. However, by the end of 2012 it will not have caught up with 2008 levels.

With such a mixed economic picture, companies must be prepared to deal with poor conditions over the next few months in addition to unstable conditions over the whole of 2011. The VAT rise, in addition to the Government's austerity measures, means that businesses will also face additional challenges. All firms must increase operational efficiency to ensure profitability remains stable in spite of an uncertain market.

Access business software can help in a number of different ways: supplier management software, for example, can allow firms to view a detailed picture of supplier performance and negotiate more favourable terms as a result.

For more information, please call Access on 0845 345 3300.

Article keywords: Confederation of British Industry, CBI, economic recovery, Ian McCafferty, lower government spending, employment growth, Bank of England interest rates, export growth, business investment, VAT rate rise, Government austerity measures, Access business software, supplier management software

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