With the UK economy expected to exit the recession in Q4 of 2009, the CBI however, has stated that growth will continue to be subdued and gross domestic product (GDP) is not likely to reach pre-recession levels before the end of 2011.

Its economic forecast for December 2009 predicted that the recession will end when UK growth resumes in the fourth quarter as consumer spending rises in anticipation of the forthcoming VAT rise. Growth in the first two quarters of 2010 will subsequently be weak at +0.3%, but should improve as the global economic recovery gathers pace with businesses rebuilding stocks and household spending improving. Growth in the range of 0.5- 0.7% is expected to be maintained through to the end of 2011.

John Cridland, CBI’s deputy director-general, 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. Consumer spending looks to be slightly more resilient than we first thought, and a weaker pound will help to support export growth.

"However, the economy will be on a fragile path of very slow growth, as we continue to feel the lasting effects of the financial crisis. And it remains vital that government sets out clearer plans to address the fiscal deficit at its next opportunity in order to help shore up future UK economic prospects."

The CBI also forecasted that the Bank of England (BoE) will start to raise interest rates in spring 2010, increasing them up to 2% by the end of the year, with no further rises during 2011.