Recession to end sooner than forecast

By Christina Fincher

LONDON (Reuters) - Britain will pull out of recession earlier than previously forecast but a sustained recovery is not assured, the Confederation of British Industry said on Monday.

The business group predicted the economy would stabilise in the fourth quarter of this year but said it would take until the beginning of next year to return to growth.

"With the process of stabilisation in the economy gaining traction over the months ahead, it is likely that we will see an end to recession before the year is out, a little sooner than predicted in our April forecast," the CBI said.

"However, the massive negative shock that we had from the credit crunch will take time to dissipate."

Data last week showed industrial output rose for the first time in over a year in April and the National Institute of Economic and Social Research estimated that Britain's economy returned to growth in April, expanding by roughly 0.2 percent over the month and another 0.1 percent in May.

The CBI joins a chorus of policymakers who have recognised the improvement in recent economic indicators but who have cautioned the recovery could be both slow and fragile.

Chancellor Alistair Darling said last week rising oil prices and a failure by other European countries to clean up their banks meant there were still clouds on the horizon.

Bank of England policymakers have taken a similar line, suggesting little rush to raise interest rates from record lows.