The CBI has raised its forecast for economic growth, saying it is more confident that a global recovery is now taking hold.
However it warned that growth would still not meet Treasury forecasts with shortfalls in revenue keeping government borrowing high.
Its Quarterly Economic Forecast predicts UK growth will average 2% in 2003, up by 0.2 %.Growth for 2004 has been revised upwards by 0.4% to 2.8% with 2.7% forecast for 2005.
Ian McCafferty, chief economist at the CBI, says: ” The CBI can now be more confident that the UK is on the road to economic recovery.
“The international background, in particular, is a lot brighter. This forecast suggests growth in the UK will accelerate over the next two years, but it will be less dramatic than the Treasury is predicting.
“Consumer confidence is holding up. Unemployment is still low so household spending growth won't slip much. But the very fact that this recovery isn't accompanied by a large jobless pool means there is limited scope for the economy to grow very strongly.
“As a result the budget deficit is due to exceed the Chancellor's forecast in both of the next couple of years.”
The CBI predicts government borrowing will peak at £35.2bn in this financial year but that it will only fall to £32.7bn by 2005, nearly £10bn higher than the Treasury forecasts announced in the last budget.