Recession not a foregone conclusion, says CBI

Richard Lambert, director-general of the Confederation of British Industry (CBI), has warned against the business community talking themselves into a recession.

In its latest quarterly economic survey the CBI, which represents nearly a quarter of a million British businesses, lowered its growth forecast for the UK economy in 2009 by 0.4 per cent to 1.3 per cent.

But despite the economic outlook having deteriorated markedly in recent months, Lambert warned the CBI was not predicting a recession.

"Back in the early 1990s we had a prolonged period of plummeting consumer demand and there were large job cuts across the board," he said.

"These days, firms are leaner and more efficient and our economy's reach is far more global.

"We should avoid believing a recession is inevitable, or talk ourselves into unnecessary trouble," he added.

However the CBI believed consumption growth was set to slow further as the consumer spending slowdown intensifies.

And rising oil and commodity costs would continue to push up inflation in the short term, the organisation said.

The CBI suggested inflation would start to fall later this year and continue its downward trend into next year, "helped by a slowing economy, the fading impact of high oil prices and expected wage restraint".

Households meanwhile would see "little or no growth" in their disposable income and savings rates would increase as consumers paid off credit cards and "put more aside for the future".

One worrying aspect was the level of investment growth will virtually grind to a halt in the next two years, the CBI warned, after a 6.2 per cent rise last year.