Having shown few signs of recovery since 2009, a worrying new economic forecast has suggested that the UK economy has fallen back into recession.
The UK has been left ëparalysedí as a result of the European debt crisis and news that mass unemployment could be set to hit three million by the end of the year, a leading think tank has reported.
The Ernst & Young Item Club has slashed its GDP growth rate from 1.5% to 0.2% for this year.
The prediction comes just days after nine European economies have had their credit ratings downgraded, including France.
The leading industry analysts have seen global stock markets plunge as Europe descends into economic gloom.
A report by the Item Club suggests that ìglobal uncertainty, and in particular the ongoing crisis in the Eurozone, has put the UK economy on hold.
ìThe UK is currently in a technical recession, and even if the Eurozone crisis is resolved promptly, it doesn’t foresee the UK starting to recover until the autumn, when CPI inflation falls back to the 2% target.î
Professor Peter Spencer, Chief Economic advisor to the Ernst & Young ITEM Club explains; ìFigures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement. But itís not going to be a repeat of 2009; we are not going to see a serious double dip.î
The economist expects a further 300,000 people to add to the unemployed total, creating a ìlengthy dole queue.î
However, there could yet be some light at the end of the tunnel as the think tank suggests inflation will fall back to below 2%, leaving households with more spending power.
They predict that the nation will have a few extra pounds in their pocket as a result, though disposable incomes will fall by 0.8 % over the next 12 months.
With inflation set to fall, it could be worth setting up a savings account.
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