INTERVIEW - UK's Darling: return to growth to start this year

By Fiona Shaikh

LECCE, Italy (Reuters) - Britain's economy is on track to return to growth by the end of this year, but weakness in other countries and rising oil prices are reasons to be cautious, finance minister Alistair Darling said on Saturday.

Darling said drastic economic stimulus measures taken by Britain and other countries since last year were having an effect, but it was still far too early for governments to think about removing some of that stimulus.

"What I said in the Budget holds, that we'll start to see a return to growth towards the end of this year," Darling told Reuters in an interview on the sidelines of a meeting of Group of Eight finance ministers.

"A lot will depend on other countries making progress: on cleaning up their bank balance sheets; volatility in commodity prices, oil for example. So I think there are reasons to be cautious."

A clutch of recent surveys have suggested the worst may be over for the British economy, although Darling said he stuck by his April forecast for the economy to contract by around 3.5 percent this year.

Leading think-tank the National Institute for Economic and Social Research reckons Britain's recession ended in April, and many economists speculate the economy may have resumed growing in the second quarter.

However, conditions elsewhere in Europe, which is Britain's biggest trading partner, seem to be getting worse, threatening to halt any pick-up in its tracks.

At the same time, renewed confidence in the outlook has helped drive up the price of oil in recent weeks, posing the risk that rising costs could kill off a recovery before it has a chance to take hold.