The UK economy may slow next year but it will avoid recession, according to chancellor Gordon Brown and the Confederation of British Industry (CBI).

The chancellor said he believed that the economy would grow by 2.25% and by 2-2.5% next year but rally to 2.75-3.25% in 2003.

This broadly mirrored the CBI's latest forecast, which predicted lower growth for next year and 2.6% in 2003.

BPIF director of corporate affairs Mike Hopkins said: "Growth for 2003 looks positive, it shows that we're out-performing our nearest neighbours."

He also welcomed measures unveiled in the Budget including research and development tax credits and funding for training.

And Hopkins was positive about the news of tax relief for businesses investing in environmentally-friendly technologies which he said would help those signed up to the BPIF's Climate Change Levy Scheme.

CBI chief economic advisor Ian McCafferty said: "The UK economy is set to avoid outright recession. The real pressure will be on businesses exposed to the international environment."

Story by John Davies