U.K. Economy Expected To Be Sluggish In 2010

Industry group says Britain’s economy will remain fragile through the middle of next year as stimulus measures including car scrappage scheme come to an end in the first quarter.

LONDON (AP) -- Economic recovery in Britain will be sluggish through the middle of next year as lending remains tight and both the government and the private sector look to pay off debt, the Confederation of British Industry forecast Monday.

The influential business group said the economy will remain fragile as stimulus measures including a temporary sales tax cut and the car scrappage scheme come to an end in the first quarter.

The CBI forecast growth of 0.3 percent in GDP in the current quarter, matching the rate in the fourth quarter when Britain ended six consecutive quarters of decline.

Growth in the second quarter is expected to increase slightly to 0.4 percent in the second quarter and 0.5 percent in the last two quarters of the year, the CBI said.

The CBI predicts annual GDP growth of 1 percent in 2010 and 2.5 percent next year.

"The state of the public finances means this recovery will be led by the UK consumer, private sector investment and the re-building of stocks," said Ian McCafferty, the CBI's chief economic adviser. "But headwinds from tight credit conditions and the desire to borrow less and pay down debt will hold this back somewhat."

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