Britain’s recovery will stall this quarter and 2012 growth will be about half the pace previously forecast as the euro-area crisis clouds the export and investment outlook, the Confederation of British Industry said.

The economy will expand 0.9 percent this year and 1.2 percent in 2012, compared with previous forecasts for growth of 1.3 percent and 2.2 percent, the London-based business lobby said in a report today. It also cut its projections for euro- area and global growth.

“The outlook for the U.K., as we look into 2012, is critically dependent on the outcome of the turmoil in the euro zone,” said Ian McCafferty, chief economic adviser at the CBI, told a press conference in London yesterday. “The risk of a double-dip has certainly risen” though it isn’t the group’s central forecast, he said.

Britain’s recovery is struggling to build momentum as inflation at a three-year high and the government’s fiscal squeeze undermine consumer confidence. At the same time, Europe’s debt crisis is damping demand in Britain’s biggest trading partner. The Bank of England expanded its bond-purchase target to 275 billion pounds ($442 billion) last month and will probably keep it at that level this week, economists forecast.

U.K. growth will be flat in the fourth quarter and accelerate to 0.2 percent in the first three months of the year, the CBI said. The group sees the euro region slipping back into a recession and failing to grow in 2012. Global expansion will be 3.5 percent in 2012, the CBI said, cutting a previous forecast of 4.5 percent.
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