Britons face “the great squeeze”

| November 2, 2009 | 0 Comments
Britons face

In the latest issue of Deloitte’s Economic Review, leading economist Roger Bootle warns that Britons are about to face “the great squeeze”.

Mr Bootle, formerly chief economist at HSBC and now managing director of Capital Economics, describes the UK’s public finances as “in the worst shape for at least half a century”.

He expects public borrowing to rise to around 15% of GDP in the current fiscal year, a level more than twice that seen when the UK was forced to seek the support of the IMF in the 1970s.

Meanwhile, public debt is heading towards 100% of GDP and according to the economist, measures put in place by Chancellor Alistair Darling in April’s Budget did not go “nearly far enough”.

As a result, Mr Bottle estimates that a further fiscal tightening worth some 5% of GDP per annum (or around £70 billion) will be needed over the next five years, and possibly much more.

He warns of “the tightest squeeze on public spending for a generation” with the knock-on effect on employment and income hitting consumer-related firms and industries the worst.

In addition, cut-backs in public investment could bode ill for the UK’s transport and construction sectors.

Exporters, however, could benefit from the lower pound.

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