Think tank predicts 'weak recovery' for UK until 2014

23/07/2009

Total UK GDP is set to fall by 4.3 per cent over the course of 2009, with a complete economic recovery likely to be achieved only in 2014.

That is according to a new report into the state of the British economy by the National Institute of Economic and Social Research (NIESR), which has served to scotch suggestions that green shoots of recovery are starting to emerge.

On top of its gloomy outlook for national GDP, the think tank has predicted that government borrowing is set to total £165.7 billion for 2009 alone, equivalent to 12 per cent of total GDP, with this brought about partly as a result of lower tax receipts.

Concluding, NIESR economist Simon Kirby said: "The recovery [in 2010] will be weak.

"We see continued contraction in consumer spending and business investment," adding that, contrary to recent reports, the housing market is also unlikely to stabilise or show signs of recovery any time soon.

Meanwhile, the newly-released minutes from the July meeting of the Bank of England's Monetary Policy Committee show that the body voted unanimously to hold rates and maintain quantitative easing at current levels.

The nine members also now believe that GDP falls will be less severe than they predicted just two months ago.

Kevin Still, EuroDebt director, commented: "With NIESR predicting that household incomes will take five years to recover from the effects of the recession and house prices continue falling for another three years, there remains a need for consumers to take a long-term and responsible approach to their financial planning, especially if they are in financial difficulty or are vulnerable to a loss of income.

"If unemployment rises to three million, then there will be more than 600,000 additional people affected, without taking account of the large numbers now taking part-time employment in the absence of fulltime vacancies.

"With household expenditure continuing to rise there is going to be continued squeeze on disposable income and this is likely to affect many consumers with high levels of secured and unsecured borrowing, where interest rates may rise on their mortgages and many credit card companies significantly increasing their rates on existing account balances and new purchases.

"The significant rise in the number of Debt Management Plans over the last 18 months is a reflection that many struggling households are using non-borrowing solutions to tackle their financial problems with the support of professional debt managers."

Tags; Current UK Economy,

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