by Trevor Sturgess

Consumer spending is expected to rise towards the end of the year as shoppers try to beat the New Year VAT increase.

The CBI, the employers’ organisation with a regional office in Sevenoaks, said this would give a short-term boost to the economy.

VAT rises from 15 per cent to 17.5 per cent on January 1. The cut was a temporary measure by Chancellor of the Exchequer Alistair Darling as a way of stimulating consumer spending.

The CBI said that modest growth towards the end of the year could see the UK emerging from recession, but growth in 2010 would be modest.

In its latest economic forecast, the CBI says economic prospects are brightening. The global economy is recovering and production is increasing. But it warns that the pace of recovery in 2010 is expected to be slow.

The CBI predicts that interest rates will start rising in spring 2010, and unemployment will continue to rise, peaking at around three million by next summer.

It says that UK GDP will post quarter-on-quarter growth of 0.3 per cent in the third quarter of 2009 Q3, edging up to 0.4 per cent in the fourth quarter as consumers bring spending forward in advance of the VAT increase in January.

But spending would fall back in early 2010. Richard Lambert, CBI Director-General, said: "The outlook is improving as the UK draws strength from quantitative easing, a weak pound and a recovering global economy.

"Although growth this quarter should mark the end of the recession, conditions in the UK will remain tough for some time yet, and it is difficult to see where demand growth will come from.

"Growth next year will remain very weak, while job losses will continue and household consumption will stay tightly squeezed. The sharp fall in business investment this year is a real concern, as are the public finances, and both will affect UK economic prospects in the years to come."