Government claims that the economy is on the road to recovery next year have been rejected by Britain’s business leaders.
Predictions for economic growth in 2010 have been slashed by the British Chambers of Commerce, and the group is also pencilling in a bigger contraction than expected during 2009.
The Chancellor, Alistair Darling, will is expected to confirm in this week’s pre-Budgert report that the recession has been far steeper than first thought.
Economists expect him to downgrade the official Budget forecast to a contraction of 4.75 per cent from the 3.75 per cent to 3.25 per cent original range.
However, Mr Darling is likely to focus on the recovery story and hold ambitious projected gross domestic product growth (GDP) at between one per cent and 1.5 per cent in 2010, rising to 3.25 per cent to 3.75 per cent in 2011.
The BCC warned the pace of growth will be hamstrung by actions to cut the national debt.
It has cut its prediction for recovery in 2010 to one per cent from 1.1 per cent.
The group raised its 2011 projection to growth of 2.3 per cent from 1.9 per cent, although this is far short of government hopes.
David Frost, director general of the BCC, said: “Unfortunately, the UK economy must make difficult adjustments in the next few years, which will limit the pace of recovery.
“In particular, the need to significantly cut the budget deficit, strengthen the banking sector and reduce excessive personal debt will inevitably limit growth.”
Economists are also doubtful of the government’s long-term GDP predictions.
The recession proved to be worse than feared, with a contraction of 0.3 per cent in the third quarter when many had hoped the UK to begin recovering.
However, the Bank of England is also upbeat over growth prospects, with forecasts suggesting growth as high as 2.2 per cent next year and 4.1 per cent in 2011.
Investec Securities economists said: “The Chancellor can probably score a few political points just by re-emphasising his existing forecast.
“But we remain sceptical that growth will be as strong.”
Right-leaning think tank Policy Exchange also cautioned that growth was dependent on spending cuts as it calculated a £1.1 trillion cost from ballooning national debt.
Paying off the national debt and servicing the extra interest payments will cost the equivalent of £17,700 for every Briton, according to the group.