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Worst of recession over, says CBI

Microscope contributor

The UK economy hit rock bottom during the first month of 2009 as the recession deepened beyond all expectations but according to the Confederation of British Industry (CBI) the worst of the quarterly falls “is now behind us”.

In its latest economic forecast, the CBI revised growth for the year from a decline of 3.3% to 3.9% after further falls in global industrial output and the credit crunch were reflected in “harsher quarter-on-quarter contraction of -1.8% for [Q1]”.

However Britain Plc is on the slow road to recovery assisted by an aggressive monetary policy, a weak pound and low inflation, which could slow the rate of GDP decline this year and edge toward 0.2% quarter-on-quarter growth a year from now.

“The UK economy remains deeply troubled, and the first quarter of this year has been tougher than expected,” said Richard Lambert, CGI director general, as businesses ran down inventories which had impacted output, jobs and investment.

“In these turbulent times it is difficult to build a clear picture of how the economy will perform, but there are a few tentative signs that the steepest phase of the recession is now behind us,” he added.

The recession was not yet over but sluggish growth should return by next spring, the business trade body claimed, by which time the economy will have shrunk by 5.1%, not nearly as severe as the cumulative 5.9%seen in the early 1980s.

The CBI predicted businesses will continue to “scale back on investment” to counter the recession, with a reduction of 9.3% in 2009 and 3.4%in 2010.

Businesses were behaving like those in the midst of a recession but that was an improvement on the panicked way they reacted to the economic uncertainty last year said Steve Brazier, president and CEO at channel analysts Canalys.

“The sentiments are more optimistic than two months ago but that doesn’t mean they will be more optimistic in two months,” he said,pointing to the collapse of Lehman Brothers and the nationalisation of RBS as examples of these uncertain times.

To accommodate these trading conditions, Brazier advised resellers to “run the business cautiously, manage cash, don’t plan for promised business and use the spare time to think about how to re-energise the business including training”.


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