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Sunday 31st of May 2009
March 31, 2008

35% chance of UK going into a recession


by Kay Murchie
”35%

There is a 35% chance of the UK going into a recession over the next 2 years as the credit crunch surrounds the UK’s property market and broader economy, according to investment bank Lehman Brothers.

The report states that the global financial turmoil is increasing mortgage rates and, as a result, will reduce consumer spending. The Bank of England will be forced to cut rates dramatically to boost the economy, say Lehman Brothers.

Downward Spiral, a report on the UK economy by Lehman Brothers, said the prospects look particularly bleak for the next 2 years. It also warns that property prices will fall by 8% over the same period.

The warning, which coincides with signs the credit squeeze in the financial markets is taking its toll on households, is the most bearish yet from a major UK forecaster.

It has become clear that the banking system, and hence the credit creation process, is under considerable strain, said Lehman Brothers.

Howard Archer an economist from Global Insight said he believed the UK economy would slow, but not enter a recession, in spite of consumers tightening their belts due to increased mortgage rates, rising food and utility bills.

We believe the UK is set for an extended period of markedly below-trend economic growth, although we remain hopeful that it will avoid recession, concluded Mr Archer.

A recent report from comparison site MoneyExpert has revealed that households are slashing spending and dipping into their savings because money is so tight. The report shows that over 26.3 million adults are planning to cut their spending this year fears about the credit squeeze hit home.

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