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December 10, 2008    

NIESR predicts deep recession as slowdown gathers pace

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by Gill Montia
NIESR predicts deep recession as slowdown gathers pace

The National Institute of Economic and Social Research (NIESR) has published its latest predictions for the UK economy, stating that it expects the economy to enter into a deep recession in the final quarter of the year.

The independent institute estimates that Gross Domestic Product (GDP) fell by 1% in the three months to the end of October, accelerating from a decline of 0.8% during the previous quarter.

A further slide is forecast in the last three months of 2008 and NIESR has warned that output could fall more sharply than expected through to the end of 2009, despite the measures presented in the Chancellor of the Exchequer’s pre-budget report, in November.

Alarmingly, the institute does not expect further interest rate reductions to be of much help but suggests that there is a very urgent need for the Government to address the availability of credit.

The £20 billion pre-budget package and sharp cuts in the Bank of England’s base rate could therefore fail to halt the slowdown, which saw industrial production fall by 1.7% in October, marking the eighth consecutive monthly fall and taking the annual decline to 5.2%.

The figures already reveal that British industry is contracting at the fastest pace since 1991 and also bring closer the prospect of a base rate below 1%.

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