Think tank warns UK may have already slipped back into recession

News Article - 20 January 2012
Category: Business

There is a strong possibility the UK may have already slipped back into recession, according to economic forecaster, the Ernst & Young Item Club.

The leading think tank reveals gross domestic product (GDP) shrunk in the final quarter of 2011 and indicated it could contract further in Q1 2012.

The resolution of the Eurozone crisis would only enable the UK economy to grow by just 0.2 per cent this year, with the Item Club predicting unemployment will rise by a further 300,000 to just under three million people.

Peter Spencer, chief economic adviser of the Item Club, said: "We are probably in technical recession. Consumption was very badly hit by rising inflation last year, business spending has been paralysed, and of course recruitment has also gone on hold as a result of the euro crisis.

"And unfortunately, turning to exports, Europe takes the lion's share of our exports."

The Item Club predicts normal levels of growth will not occur within the UK economy for the next two years, citing the uncertainty over the Eurozone as the primary reason for a continued lack of investment in the UK.

The think tank also revealed if a solution to the Eurozone crisis was found the UK economy would still only grow by 1.75 per cent in 2013 and 2.8 per cent in 2014.

However, despite the number of unemployed people in the UK continuing to rise many employers have complained they have a plethora of job vacancies that they just cannot fill.

Mark Derry, owner of Brasserie Blanc, said: "We are finding it very difficult to find people at the moment which is quite unusual.

"Apparently there's approaching a million under 25-year-olds unemployed and yet when we open restaurants… in the end we are ending up going sometimes overseas to find people."

Another gloomy forecast from the Centre for Economics and Business Research concurs with the Item Club's fears saying the UK economy could shrink by as much as 0.4 per cent this year and by a full 1 per cent if the Eurozone was to break up.

Article keywords: uk recession

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