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The economy is still on the right growth trajectory, despite fears that spending cuts will plunge the UK back into recession, claim government and business bodies.

In its latest economic forecast, the Confederation of British Industry (CBI) predicts that the economy will grow by 1.3 per cent in 2010, up from 1 per cent in its previous March forecast. The slight upward revision reflects growth in industrial production and overseas demand for UK-made goods.

The predictions are in line with those of the Office for Budget Responsibility, a government watchdog, which forecasts growth for the year at 1.3 per cent, similar to that of the Labour government's projection of 1 per cent to 1.5 per cent.

Richard Lambert, CBI director-general, says: ‘Although the risks to the economic outlook have increased, our view is that the UK’s tentative recovery will be sustained. However, growth will be weak and we do not expect a return to pre-recession GDP levels until 2012.

‘It is clear that the private sector will have to be the main driver of economic growth to offset lower government spending. It is therefore essential that next week’s emergency Budget creates the right conditions for businesses to drive growth and create new jobs, as well as setting out bold action to repair the public finances.’

However, John Philpott, chief economic adviser at the Chartered Institute for Personnel and Development, claims the government’s deficit reduction measures will stall recovery and result in a post-recession peak of nearly 3 million unemployed.

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