The recession will be shorter and less severe than previously expected, according to the CBI, which now predicts that 200,000 fewer jobs will be lost.

Britain’s leading business organisation has revised its forecasts for the economy, showing output growing from January next year and unemployment peaking at 3.03 million.

In April, it said that it expected no economic growth until next April and predicted that unemployment would soar to 3.25 million.

However, it warned that the recovery would be “slow and gradual” and that it would take time to see whether the emerging “green shoots” would deliver sustainable growth.

“The harshest period of the recession looks to be behind us, the economy is stabilising and this should continue during the second half of this year,” Richard Lambert, director general, of the CBI, said.

The CBI predicts that GDP will fall only marginally in the second half of this year before growing by 0.1 per cent and 0.3 per cent in the first two quarters of 2010.

The CBI said that businesses had ended their cycle of extensive de-stocking, which dragged down GDP between October and March. Businesses are also reporting that while access to credit is still difficult, it is not getting worse, helping to bolster confidence.

By the end of the recession, the economy will have shrunk by 4.8 per cent, the CBI estimates, taking less of a toll than the recession of the 1980s, when it contracted by 5.9 per cent.

Jobs are being saved because staff are working fewer hours or are accepting pay freezes in a bid to keep their jobs, the CBI said. About a third of private sector companies are operating pay freezes.

Mr Lambert warned that there were still anxieties and concerns about unemployment, especially among younger people between 18 and 24.

Despite revising up its forecast for the first time in two years, the CBI’s expectations are still at odds with the Government’s upbeat forecasts that the economy will start to grow before the end of the year.

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