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Recession Over By Christmas, Says Cbi

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The CBI has given Gordon Brown a boost as he attempts to revive the government's fortunes, predicting that Britain should emerge from recession by the end of the year.

As the prime minister prepares to rally his party at next week's Labour conference, the business lobby group has published its forecast today saying that Britain will emerge from the worst recession in decades by the end of this month as consumers rush to the shops ahead of January's VAT increase.

In its latest health check of the British economy, the CBI said gross domestic product would grow by 0.3% in the third quarter of the year and by 0.4% in the final three months, after five consecutive quarters of contraction.

The return to growth would be much earlier than the CBI forecast in June, when it said that recovery would not come until next year.

It warned that the rush to buy big ticket items such as kitchens and furniture before VAT returns to 17.5% on 1 January next year – after it was cut to 15% in December 2008 to stimulate spending – will dampen consumer spending in 2010, ensuring growth is "fragile".

It said that although companies may be rebuilding stocks, they are likely to do so very cautiously and 2010 should start with very weak growth of only 0.1% in the first quarter and 0.3% in the second.

Doesn't the UK need around 2% growth to stand still? So essentially no recovery the job losses will continue for a long time yet.

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Britain faces 'slow recovery and lower living standards'

The independent went with the above headline.

Britain's economic recovery will be "fragile, slow and protracted", the Confederation of British Industry (CBI) predicted yesterday.

While the employers' organisation seems confident that the UK has emerged, technically, from recession in the past few months, it stressed that 2010 would be a "tough" year economically, with falling living standards and growth that would actually fall back slightly in the new year, fuelling fears that the UK could experience the much-feared "double dip" or "W-shaped" recession.

"We do worry that it is going to be weak," said the CBI's chief economist, Ian McCafferty. "As the stimulus is withdrawn it leaves the economy at risk of a further slowdown."

Overall, the CBI forecast that GDP would shrink by 4.3 per cent in 2009 and grow by 0.9 per cent in 2010. It sees unemployment peaking at three million in the second quarter of next year.

Richard Lambert, director general of the CBI, added: "Armageddon has receded a bit over the horizon. The outlook is improving as the UK draws strength from quantitative easing, a weak pound and a recovering global economy. Although growth this quarter should mark the end of the recession, conditions will remain tough for some time yet and it is difficult to see where demand growth will come from."

In its latest economic outlook, the CBI said the economy would expand in the third quarter of this year, by just 0.3 per cent – for the first time since spring 2008. Growth would accelerate to 0.4 per cent in the run-up to Christmas as shoppers brought forward their spending in advance of the VAT increase scheduled for 1 January, it added.

However, growth is then set to fall back to close to stagnation, at 0.1 per cent in the first three months of 2010, and 0.3 per cent in the following quarter, the business group warned. The CBI's projections are much more pessimistic than those of the Treasury in April's Budget, which suggested a 3.5 per cent contraction this year and a 1.25 per cent growth rate for next year.

Mr McCafferty said he expected the Bank of England to raise interest rates to 2 per cent next year, and for Government borrowing to balloon to £182bn.

He called on all the political parties to come up with a "credible plan" to return the public finances to a sustainable footing, though not at the price of "indiscriminate" cuts in public spending. Investment, he said, remained "particularly weak" and down by almost a fifth this year.

Household consumption would fall next year as incomes were squeezed and individuals chose to pay off debts and save, he added, dropping by an estimated 3.2 per cent this year and again by 0.2 per cent in 2010. Excess capacity in the economy is running at 6 per cent, according to the CBI's latest estimates, and bank lending would continue to be constrained by the need for lenders to deleverage and rebuild their balance sheets.

Slightly different tone to the Guardian piece.

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UK economy 'faces tough recovery'

The BBC went with the above headline.

The UK economy has begun to emerge from recession but growth next year will be fragile, a forecast by business group the CBI has warned.

It predicts UK GDP will grow by 0.3% between July and September from the previous three months, and will rise by 0.4% between October and December.

However, it said a lack of demand meant it was hard to foresee rapid growth.

January's increase in VAT would dampen spending, it warned, while firms would be "cautious" in raising output.

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