A report by the Confederation of British Industry (CBI), a leading UK business lobby group, showed the UK economy will be out of the recession by the end of this year, but warned that the UK faces a “slow and anemic” recovery. A return to pre-recession levels is unlikely until the end of 2011, the report added.

Read the full report here.

With the help of increased consumer spending before the VAT rise to 17.5 percent, analysts predict a Gross Domestic Product (GDP) growth of 0.5 percent for the last quarter of 2009 and a drop to 0.3 percent for the first two quarters of 2010. A growth range of 0.5 percent and 0.7 percent is expected to remain throughout 2011, reported the CBI.

“There is no sign of a clear driver of strong economic growth,” John Cridland, deputy director-general of CBI, said in a statement on the group’s website.

Britain should see the backside of the recession by the end of 2009, says CBI. Photo credit: Cristiano Betta

CBI forecasts another cycle of job freezes in the spring and job losses in the autumn, The Financial Times reported. Unemployment is expected to rise in the coming year but at a lower peak than originally said, at just over 2.8 million by the third quarter of 2010. Earnings growth rate will increase in 2011 at 3.9 percent.

Ian McCafferty, CBI Chief Economic Adviser, agreed the UK would have to face a “number of structural hurdles over the coming two years.” Net borrowing will rise to £184.1 billion in 2010-11 before falling to £154 billion in 2011-12 while the UK bank rate will peak at 2 percent by 2011. With a recovering global economy and limited oil supply, oil prices are expected to rise to $100 a barrel by the end of 2011, the CBI report said.

This report was less optimistic than the recent forecasts made in the pre-Budget report of Britain’s Chancellor of Exchequer Alistair Darling, where the UK GDP growth was predicted at 1.25 percent in 2010 and 3.5 percent in 2011, reported The Guardian.  The CBI report was, however, more positive than the predictions of the British Chambers of Commerce (BCC), which said GDP growth would be at 1 percent in 2010 and 2.3 percent in 2011, reported the BBC.

Some analysts believe that the UK economy might have already escaped the recession in the third quarter of this year. The Office of National Statistics (ONS) is due to release a revision of the GDP for the third quarter figure tomorrow. Original data had showed the GDP to be decreasing by 0.4 percent, but many economists believe the revision will could bring it to 0.1 percent, reported The Telegraph.

In a statement on CBI’s website, Cridland said, “Although the first few months of 2010 will be difficult, growth will gradually pick up and increasing confidence and demand will lead the UK into a more positive 2011.”