The UK economy has returned to growth for the first time since May last year, signalling the end of the recession, a think tank has predicted.
According to the latest forecast by the National Institute of Economic and Social Research (NIESR), gross domestic product rose by 0.2% in the three months to August, after falling by 0.3% in the three months to July.
However, NIESR qualified that even though the economy may no longer be shrinking, it could take a long time for sustainable growth to resume.
NIESR said: “There may well be a period of stagnation now, with output rising in some months and falling in others; the end of the recession should not be confused with a return to normal economic conditions.”
Other analysts have predicted that economic growth will not resume until 2010, and earlier this year, NIESR wrongly predicted that the UK economy returned to growth in April.
However, official figures released today showed that manufacturing output rose by 0.9% in July, the strongest results recorded for the sector in more than three years.
Elsewhere, a survey released today by advisory firm PricewaterhouseCoopers found that entrepreneurs share NIESR’s view that the worst is over.
The study revealed a renewed optimism among small businesses, with almost three quarters expecting their prospects to improve or remain steady over the next 12 months.
Mary Monfries, head of UK private business at PricewaterhouseCoopers, said the success of the recovery depended upon business owners’ confidence.
She said: “Private businesses continue to be challenged by slow or negative economic growth, reduced access to finance, a weak pound and increases in the cost of borrowing. Yet business owners remain defiantly upbeat with a resolute ‘hold our nerve and come through stronger’ spirit.
“Encouraging long-term investment of capital and time in business growth is vital to the health of the economy, and will in turn limit the damage of recession as recovery begins.”
© Crimson Business Ltd. 2009