The UK economy is probably already in recession, according to senior economists at the Centre for economics and business research (Cebr).
The comments come as the Cebr released new growth forecasts for 2012, downgrading from 0.7 per cent to minus 0.4 per cent, with a risk of a more serious decline of 1.1 per cent if developments in the Euro zone take a turn for the worse.
According to Cebr there was negative GDP growth in Q4 2011 and will be in Q1 2012, and two consecutive months of negative growth define a recession.
Other predictions from the Cebr include the base rate remaining at its record low of 0.5 per cent until 2016, while the Bank of England is expected to increase quantitative easing to a total of £400 billion this year.
Meanwhile inflation is expected to fall below its target of two per cent by the end of 2012.
Commenting, Douglass McWilliams, chief executive of Cebr said: “We take no pleasure in outlining such a bleak forecast. But the world is going through a fundamental change where previously poor economies are industrialising fast. This is good news for them, but because of the limits imposed by shortages of energy, minerals and food, some of their growth is at our expense.
“This is not to say that if we break off trading with them we will be better off. On the contrary, a strategy of disengagement with the rest of the world would make matters very much worse.
“The Chancellor will not reduce the deficit as quickly as he thinks since tax revenues will be depressed by slow growth. But this does not make the case for giving up on austerity. Indeed our forecast, which shows that the UK debt to GDP ratio will go above 90%, means that he will at the minimum have to keep the austerity programme going for much longer than he originally thought.”
