UK CBI Chief: Election Politics Threaten Economic Recovery

UK CBI Chief: Election Politics Threaten Economic Recovery 

LONDON -(Dow Jones)- Efforts by the U.K.'s main political parties to curry favor with voters ahead of the general election poses risks to the economic recovery, the head of the Confederation of British Industry warned Friday. 

Richard Lambert, a former member of the Bank of England's Monetary Policy Committee and director general of the CBI, the U.K.'s largest business lobby, said business owners are already facing uncertain economic prospects. 

"And we are already in that frustrating period in the runup to a general election when policies are set by opinion polls and politicians are unwilling to look much further ahead than the end of their noses," he said in a new year message. 

Prime Minister Gordon Brown must hold an election by June 3, with his Labour Party currently trailing the opposition Conservatives by a significant margin in recent polls. 

In his own new year message, Brown said his government's economic strategy is to "go for growth" and warned that opposition promises to put a squeeze on public spending could "wreck the recovery." 

The U.K. has been in recession since the second quarter of 2008, suffering its deepest recession in decades. The CBI expects the economy to return to growth in the fourth quarter of 2009 but says the recovery will be slower than the government predicts. 

Lambert said the other main risks to the recovery are the still-fragile banking system and the "poor shape" of public finances. The CBI again urged the government to establish "a credible path back to fiscal stability." 

Lambert said many businesses remain worried that these difficulties could yet cause a double-dip recession in the U.K. but that the more likely outcome is a very slow recovery. 

But Lambert said there will also be opportunities for U.K. firms over the next year. 

"The message is that the U.K. does indeed face big structural problems, but with sufficient determination they can be largely fixed within the lifetime of the next parliament," he said. 

Lambert also said he hopes the passing of the election will see the debate about the banking system's future move on from "political point-scoring around bonuses to much more important questions about reserves and liquidity." 

-By Laurence Norman, Dow Jones Newswires; 44-207-842-9270; laurence.norman@dowjones.com 

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(END) Dow Jones Newswires
December 31, 2009 19:16 ET (00:16 GMT)