Industry body says worst of recession is 'behind us' but warns recovery will be slow and gradual

The Confederation of British Industry (CBI) has downgraded its recession forecasts but warned the recovery will be “slow and gradual”.

The body has revised its growth and employment forecasts, cutting the number it expects to see out of work at the peak by 200,000 to 3.03m, down from its April prediction of 3.25m.

It expects the economy to contract by 3.9% this year and a return to growth of 0.7% in 2010. Growth of 0.1% is likely in the first three months of the year and by 0.3% in the second quarter.

CBI director general Richard Lambert said it seemed that the worst of the recession was “behind us” but warned that extensive talk of green shoots may be premature.

He said: “Some commentators have been carried away by recent tentative indicators as evidence of 'green shoots'," he said.

"It will take some time before we can be sure these shoots have roots we can depend on for sustainable growth."

He added: "The return to growth is likely to be a slow and gradual one; difficult credit conditions are still affecting business behaviour.

"For positive growth to return, lenders need to feel more confident so that credit can start flowing again."

The figures come as shadow chancellor George Osborne called for politicians on all sides to admit there would be cuts in public spending.

Writing in the Times, the minister says it is “ridiculous to pretend there won’t be cuts” and called for “honesty” on the issue from both Labour and the Conservatives.