By Ian Dunt
Fears of a triple-dip recession faded this morning, when the Bank of England's official growth forecast suggested the UK economy was improving slightly.
With the eurozone enjoying a period of relative stability, an impressive performance in the stock markets and improvement in the US economy, analysts expect the UK to stave off a return to recession.
However, bad weather conditions, including a long period of snow, may have deterred consumers.
"Weakness in overall output [in 2012] reflects large falls in construction which are unlikely to be repeated in 2013," Bank of England governor Mervyn King said.
"The bulk of the economy – manufacturing and services - actually grew over 2012."
The Bank of England committee said the economy is likely to see a slow but sustained recovery over the next three years.
"It hasn't been a normal recession and it won't be a normal recovery," King warned
"The expansion is expected to be weak by historical standards, mirroring the relatively subdued prospects for both global demand and the supply capacity of the domestic economy.
"GDP is likely to remain below its pre-crisis level until 2015."
The Confederation of British industry predicted growth in the first quarter of 2013 and no triple-dip recession yesterday.
However, it also predicted borrowing would reach £112.5 billion in 2014, £10 billion more than its November outlook.
Trade, manufacturing and business investment are expected to pick up in the months ahead, director general John Cridland said.
"We are beginning to see the return of organic growth," he said.
George Osborne is under pressure to do something to bolster the UK economy in his Budget next month, with Labour demanding more borrowing to fund investment and backbench Tories wanting tax cuts to boost spending.