The UK economy picked up speed in 2010 but 2011 may be more challenging due to the negative impact of planned tax rises and public spending cuts. This will certainly dampen the recovery and could lead to higher unemployment in the short term. The most likely scenario, however, is that modest GDP growth of around 2% will be achieved in 2011, helped by increased exports and a gradual pick-up in business investment supported by continued low interest rates. But consumer confidence and spending will be constrained by weak house prices and continued limits on bank lending. So it will be a testing year for the UK economy and businesses should bear in mind the downside risks to growth.
