Nationwide's gloomy UK economic forecast
Nationwide offers gloomy economic forecast as profits down 62 per cent year on year
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By Darren Estwick. |  |
Friday, 20, Nov 2009 11:58
Nationwide Building Society has reported a gloomy forecast for the UK economy, after saying pre-tax profits were down 62 per cent on last year.
Pre-tax profit for the six months to September 30th was down to £143 million, from £374 million a year ago.
Nationwide said the recessionary economic climate had contributed to increased levels of business failures, weak tenant demand and significantly reduces investor appetite within the UK commercial property market.
Looking forward, Nationwide said while the economic outlook had improved over the last six months, the recovery was expected to be slow, and "likely to take several years before UK GDP reaches its pre-recession level of output".
They added that although recent labour market figures had been better than expected, unemployment is likely to continue increasing well into next year.
Nationwide's chief executive Grahame Beale has said: "Looking ahead we expect the remainder of this year and next to present a very difficult trading environment. Economic recovery is forecast to be slow and we expect interest rates to remain at their current level until at least the fourth quarter of 2010. We are also cautious on future prospects for the housing market.
"The growth in house prices over recent months appears to be driven by lack of supply, and growth in unemployment throughout 2010 will inevitably exert downward pressure on house prices. Notwithstanding this, our strong capital base, low risk profile and highly liquid balance sheet continues to underpin our financial strength and ability to meet our core objective of providing financial security and support to our members."
Nationwide have been cautious with their housing market forecast, wary to say that recent rises were "green shoots".
Today the building society said much of the increase in prices this year has been caused by an unusually low level of properties available for sale rather than a robust recovery in house purchase transactions. Housing demand remains constrained by high unemployment and tight credit conditions, they added.
Nationwide is the second largest savings provider and third largest mortgage lender in the UK with member savings balances of £122.7 billion and residential loan assets of £128.8 billion.