More woes for Osborne as CBI reverses growth predictions for UK economy

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  By Martin Kelly
 
UK Chancellor George Osborne has come under more pressure to alter his government’s austerity measures after the Confederation of British Industries (CBI) claimed it now expected the UK economy to contract in 2012.
 
The organisation which had previously published figures suggesting growth of 0.6% for this year has now reversed its stance and is predicting UK GDP will shrink by 0.3%.

 

The CBI has said that its change reflects “weaker economic conditions” and has also downgraded its expectations for 2013 from 2% growth to 1.2%.  

Despite his own organisation’s forecast for 2012 falling by 150%, John Cridland, the CBI’s director general, insisted the UK economy was not falling and said: “At present I believe the economy is flat rather than falling but, nonetheless, momentum seems to have weakened and the latest official figures put the UK in recession for the second quarter of this year.”

UK GDP has fallen for three months in succession as the country’s economy remains in a double dip recession.  The SNP has consistently called on the UK government to take action to help the beleaguered construction sector and has pointed to the many ‘shovel ready’ projects currently waiting in Scotland.

The CBI’s Scottish arm this week backed the UK government’s austerity plans and instead called on the Scottish government to cut back on public service spending and instead divert the funds into infrastructure.

Rachel Reeves MP, Labour’s shadow chief secretary to the Treasury, called on UK PM David Cameron and his Chancellor George Osborne to admit their plan has failed and to “change course before even more long-term damage is done”.

Ms Reeves added: “These very disappointing forecasts suggest the short-term boost from the Olympics will not be enough to counteract the longest double-dip recession since World War II,”