LONDON - A MAJOR business lobby group predicted on Monday that the worst of Britain's recession may be over, but growth would only resume next year, in a forecast just days before ministers unveil a crunch budget.

The Confederation of British Industry (CBI) said the recession was deeper than expected in the first three months of this year, sparking an estimated contraction of 3.9 per cent over the whole of 2009, and warned Britain faces a 'slow and fragile' recovery.

Finance minister Alistair Darling unveils his annual budget, including 2009-10 tax and spending plans, on Wednesday, and is expected to rip up his economic growth projections as Britain faces its first recession since 1991.

In November, Mr Darling had predicted the economy would contract by up to 1.25 per cent in 2009 and rebound with growth of up to 2.0 per cent in 2010.

The CBI said the world economy has worsened since its last forecast in February, and predicted Britain's economy had contracted 1.8 per cent quarter-on-quarter in the first three months of this year.

But with an aggressive monetary policy, a weaker pound, low inflation and fiscal stimulus packages across the world, the rate of decline would slow and growth of 0.2 per cent could return by the second quarter of 2010, it added.

'In these turbulent times it is difficult to build a clear picture of how the economy will perform,' said CBI director-general Richard Lambert.

'But there are a few tentative signs that the steepest phase of the recession is now behind us, and that the banking packages, aggressive monetary policy and fiscal support will steady the pace of decline from here on.

'The recession is by no means over, but we see a return to very weak growth by spring 2010.' The CBI forecast that unemployment would peak at 3.25 million in early 2010, while inflation would fall below the Bank of England's target of two per cent later this year and remain below target throughout next year. -- AFP