The Chancellor today sought to damp down hopes of an early end to the recession, arguing that high oil prices could hold back recovery.
An opinion poll for The Times today suggested that more people were detecting green shoots, with 32 per cent of those questioned predicting that the country’s finances would fare “well” over the next year, up from a low point of 18 per cent in January.
A leading think-tank had also claimed this week that the UK economy may have bottomed out after returning to growth in April and May.
But in an interview with the Financial Times, Alistair Darling said: “I think it is important that people should not become complacent.”
He said that he was sticking to his Budget forecast and expecting the recession to finish towards the end of this year.
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The Chancellor said the volatile oil price — which last night reached an eight-month high above $73 a barrel — had “the potential to be a huge problem as far as the recovery is concerned”.
“We’ve got to convince everyone, including some of the Gulf states, who really have been badly affected by this downturn in their broader economies, it is in no one’s interest that we allow a high oil price to impede recovery.
He also warned that getting banks lending again remained a problem, and that lenders were still struggling to build confidence.
“If you don’t fix the banking problem, you’ll never fix the wider economy,” Mr Darling said.
Sterling rallied against both the euro and the dollar yesterday after the upbeat economic forecast from National Institute of Economic and Social Research (NIESR), which estimated GDP rose by 0.2 per cent in April and 0.1 per cent in May.
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The pound, which almost reached parity with the single currency at the end of 2008, climbed to €1.174 and was also up against the dollar, to $1.648.
Mr Darling also commented on the circumstances surrounding his retention of his job in last week’s Cabinet reshuffle.
It was widely expected that he would be replaced by Ed Balls, his Cabinet colleague, one of Gordon Brown’s most trusted lieutenants.
He said: “I was always very clear there was a job of work to be done. I wanted to see through the work we started when I came here in 2007.”