Economic ‘horror movie’ on cards
Jul 21 2008 by Iain Laing, The Journal
THE UK is heading for an economic “horror movie” and will struggle to avoid recession next year, an influential think tank has claimed.
Ernst & Young’s ITEM Club is forecasting GDP growth of 1% next year, inflation to remain above the Government’s target for the next 12 months and a “substantial” increase in unemployment.
The group also predicts that consumer spending will nearly slow to a standstill in 2009, rising by just 0.2% as households wrestle with rising inflation, lower credit availability and a sharp reversal in the housing market.
ITEM’s chief economist Peter Spencer said: “Both on the high street and in the housing market it is going to get a great deal worse before it gets better.
“We have already seen a housing crisis that has morphed from a credit crunch to a general collapse in confidence as prices have tumbled.” He added: “Consumers will inevitably cut back on non-essential spending in the face of the impact of rising food and energy prices on their discretionary incomes. Many parts of the leisure sector will be particularly hard hit.”
The report comes after the Chancellor Alistair Darling revealed in an interview that the UK downturn would be more “profound” and last longer than he expected.
