The Confederation of British Industry has cut its growth forecast for 2012 from 1.2 per cent to 0.9 per cent.

The figures come from the CBI’s economic forecast which was released on 13 February.

It said the cut in growth forecast was due to the contraction of GDP during Q4 2011 and that growth would remain subdued throughout 2012, especially during the first half of the year

Growth for the first half of the year was forecast to be 0.2 per cent followed by 0.6 per cent in Q3 and 0.5 per cent in Q4.

Interest rates would continue to remain at 0.5 per cent for the rest of the year but inflation would steadily fall to 2.2 per cent, almost reaching the Bank of England’s two per cent target.

It credited the Bank for its use of quantitative easing to prevent a banking crisis.

Ian McCafferty, chief economic adviser at the CBI, said: “After a particularly difficult autumn which saw a contraction in growth in the fourth quarter, recent business survey data in manufacturing and professional services, has been more encouraging with an uptick in activity and improved business sentiment.”

John Cridland, CBI director-general, said: “Some activity has picked-up since before Christmas and the mood among many businesses has improved, with the exception of companies serving the UK consumer where business remains flat.

“The pressure on household incomes will also ease slightly in the second half of this year as inflation falls, resulting in a slight increase in consumer spending. But weak wage growth and high levels of unemployment will continue to be a brake on household spending.”