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The British economy won’t start growing again until 2010 and the Bank of England may need to expand its money-printing plan to underpin the recovery, the Confederation of British Industry said.

Gross domestic product will fall 0.3 percent in the second quarter and 0.1 percent in the third, and will stop shrinking in the final three months of the year, the biggest U.K. business lobby said in forecasts released today. The group previously predicted a contraction throughout the year.

Bank of England markets director Paul Fisher said last week that Britain should not be “complacent” on the prospects for a recovery, which may falter if banks remain unable to lend enough. Policy makers this month reiterated their plan to print 125 billion pounds ($206 billion) of the total 150 billion pounds authorized and spend it in U.K. debt markets.

“We still have some way to go before the U.K. economy is truly out of the woods,” Ian McCafferty, the CBI’s chief economic adviser, told reporters. “There may well be a justification for extending the 150 billion pounds a little further to make sure we do not slip back.”

The CBI said yesterday that Prime Minister Gordon Brown and the opposition Conservatives need to talk about how they will repair the public finances once growth rebounds.

Bond Sale

Britain plans to sell as much as 5 billion pounds of bonds through banks tomorrow in the U.K.’s first so-called syndication since 2005, according to the Debt Management Office. The sale is part of a record 22 billion pounds the Treasury aims to raise this year to finance the budget deficit.

“The U.K. faces a fiscal deficit never before seen in peacetime, yet the war between political parties is not resulting in any proper answers as to how this will be addressed,” said John Cridland, deputy director general of the CBI. “Whichever political party wins the next election needs to secure a mandate for radical action.”

More than half of U.K. voters see Brown staying in his post as harmful for Britain, a YouGov Plc poll in the Sunday Times newspaper showed yesterday.

The economy will grow again in the first quarter of 2010, expanding 0 budget car insurance.1 percent, and then 0.3 percent in the second quarter, the CBI said.

More companies are freezing wages and cutting working hours instead of firing staff than in previous recessions, the organization said. This should limit job losses through 2009, with the CBI now expecting unemployment to peak in the second quarter at 3.03 million, a rate of 9.6 percent, up from 2.2 million in the first quarter of 2009. In April, it predicted a peak of 3.25 million, or 10.3 percent, in the same quarter.

CBI Pessimism

The CBI’s growth predictions are more pessimistic than those of other economists. Royal Bank of Scotland Group Plc economist Ross Walker said on June 12 that the economy will start growing as soon as the third quarter.

Reports this month indicate the recession is showing some signs of easing. Manufacturing output rose and services industries expanded for the first time in a year, while house prices stabilized in May.

The Royal Institution of Chartered Surveyors said today U.K. homebuyers are clinching smaller discounts on property prices as the housing market stabilizes.

“There are flickers of life visible all round the country,” Richard Lambert, the CBI’s director-general and a former Bank of England policy maker, told reporters. ‘We are past the worst but we can’t say with any great certainty that the recession is over.”

Policy maker Andrew Sentance said last week that the recession may be “bottoming out.” Fisher said that there may still be “bumps in the road ahead” for the U.K. economy.

A global survey of company executives in June showed most of them see signs of economic recovery this year, Ernst & Young said today. Among 570 respondents, a quarter said the worst was past while 42 percent said some signs of life were evident or would be by the end of the year. About a fifth saw no recovery before the second half of next year.

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