The ailing UK economy emerged from recession between July and September, official estimates are set to show today.
Forecasters expect modest 0.2% growth for the third quarter of 2009 after five quarters of economic contraction.
The return to positive growth should be led by a recovery in the UK’s dominant services sector, despite shakier conditions among manufacturers and a difficult high street climate.
But UK output has shrunk by more than 5% during the period and unemployment will continue to climb while the economy makes up the gap.
Government borrowing is also set to soar to a record £175bn (€194bn) this year to pay for spending plans and higher benefit bills – which will eventually have to be tackled with spending cuts and tax rises.
The Ernst & Young ITEM Club says the economy is likely to show modest growth in the second half of this year because consumers will bring spending forward to avoid VAT hikes next year.
While sectors such as the car industry have also benefited from the scrappage scheme this is another temporary measure and GDP could struggle to hit 1% next year, ITEM predicts.