The UK economy is set to avoid a double dip recession and grow sluggishly this year.

That's the view of the CBI, the employers' organisation. But it has revised downwards its growth forecast, blaming December's bad weather for a slight reduction in its original two per cent prediction to 1.8 per cent.

Its forecast for 2012 is for slightly faster growth of 2.3 per cent.

Despite negative growth in the past quarter, the CBI believes the risk of a double dip is low.

However, it expects interest rates to edge up to 3.75 per cent by the end of 2012. It also predicts that unemployment will peak at 2.71 million this year from its current 2.5m.

John Cridland, CBI Director-General, said: "The early estimate for GDP growth in the final quarter of last year came as a surprise to everyone, suggesting that underlying growth may have been weaker than previously thought.

"We must wait and see just how weak it was, and how much was down to December's bad weather, but we do expect growth in 2011, albeit rather anaemic and sluggish, which will accelerate during 2012."

He added that with household spending under considerable strain, business investment and exports would be crucial to economic growth over the coming two years.

"While this growth will still be lower than the long-term average and unemployment will continue to creep up, job numbers will also increase as the recovery picks up."