Economy at risk of return to negative growth

'We expect net exports to boost growth over the next few years.' he said.

While he has been disappointed by exports to date Kirby believes this is a 'temporary phenomenon' that reflects the fact that many companies price their goods in overseas currencies and he said some companies have chosen to keep back the benefits from a weaker pound to shore up profits rather than pass them on to customers.

He believes that will change and net exports will be boosted by the growth in world trade and the 20% fall in the pound from pre-crisis levels - although weak growth in our key European trading partners could hobble export growth.

And he believes that the low level of bank lending also poses a serious risk to his growth forecasts.

'If that were to persist that would provide downside risks,' he said.

Kirby expects unemployment to rise again in 2011 as public sector job losses add to the number of people out of work and thinks the jobless number could peak at 2.8 million people.

He also expects inflation to remain well above the Bank of England's target throughout next year before falling back below target in 2012. 

He expects the Bank’s Monetary Policy Committee to keep rates at current record low levels until the second quarter of next year, but recognised that market expectations have edged towards an earlier move after Friday's stronger than expected data.

'We would advise the MPC to make no change at the next few meetings as they assess whether this robust growth persists,' he said, adding evidence of private sector demand growth would likely lead to a modest increase later this year.