UK economic decline continues apace
Economic suffering expected to ride on
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Thursday, 06, Nov 2008 09:25
The UK economy shrank by 0.5 per cent in the last three months, according to latest forecasts.
Office for National Statistics (ONS) data for July to September showed a 0.5 per cent contraction in GDP, and new figures from the National Institute of Economic and Social Research (NIESR) say this decline continued over October.
Over last month alone, the body said GDP fell 0.27 per cent.
NIESR says the October 2008 fall in GDP means the economy is now smaller than in October 2007 – the first time this has occurred since 1990.
The body also predicts interest rate cuts from the Bank of England are "unlikely to be as effective as they have been in the past and an early resumption of economic growth cannot be expected".
NIESR expects the downturn to last until 2010 – with the abundance of credit that boosted the economy in the housing bubble gone as a support for the economy.
Last month the Ernst & Young ITEM Club forecast a one per cent contraction of the economy in 2009 – the first annual year of negative growth since 1992 – and growth of only one per cent in 2010.
Capital Economics, meanwhile, expects the recession to last at least two years – and be greater than the early 1990s.
"It is likely that the government’s recapitalisation of the banks will not stop lending growth from slowing sharply," the consultancy said.
"Meanwhile, house prices are likely to fall by another 20 per cent or so and unemployment is set to rise by around 1.7 million."