UK Economy: Welcome to the 1940’s

The UK is heading into the worst recession since 1947 according to analysts at the Bank of America and Capital Economics.

Economists at the two institutions estimate that the UK’s economic output could shrink by as much as 2.5% in 2009, putting Britain into the most severe economic decline for over 60 years.

The prediction followed dismal news from the Office for National Statistics, which revealed that Gross Domestic Product (GDP), has already had its sharpest fall since 1990.

GDP, which indicates the national economic output, stagnated at 0% in the second quarter, and fell 0.6% in the third quarter.

With the economy in free fall, unemployment is expected to surge, whilst property prices will plunge further throughout 2009.

Meanwhile, the government’s efforts to increase spending by cutting VAT have been criticised by the International Monetary Fund (IMF).

IMF chief economist Olivier Blanchard said Alistair Darling’s 2.5% VAT cut did not give consumers any ‘real incentive’ to spend.

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