Economists forecast deeper UK recession

Economists forecast deeper UK recession

The UK economy is expected to contract by 1.3 per cent in 2012, according to respected economists at Standard Chartered bank.

Growth of 0.6% had been predicted but Standard Chartered’s latest survey, of 350 companies, points to a sharp recession in the face of the ongoing eurozone crisis.

The eurozone economy is expected to contract by 1.5 per cent next year.

Three factors are expected to contribute to the UK falling back into recession: a decline in consumer and business confidence; banks keeping tighter control on credit; and cuts to government budgets across Europe.

While the West contracts, slower expansion is expected in Asia, where growth is predicted to fall from 7.3% in 2011 to 6.5% next year.

The resilience of the East will prevent the world tipping into a global recession and the world economy as a whole is expected to grow 2.2 per cent.

Standard Chartered’s chief economist Gerard Lyons said: “It will be a recovery made in the East and felt in the West. If ever one needed to illustrate the shift in the balance of power, this is it”.

The Treasury’s predictions are more optimistic, with Britain expected to narrowly avoid recession next year.

However the Bank for International Settlements (BIS) today warned the Bank of England that its quantitative easing (QE) programme may fail to boost the UK’s economic recovery.

According to the Telegraph, the BIS claims that QE’s effectiveness may be diminished because it would not be able to reduce government debt by as much as expected.

The latest round of QE, valued at £75 billion, was agreed in November and it could be increased by up to £500 billion in February.

The QE programme is designed to push up asset prices and to encourage spending by lowering borrowing costs and raising wealth.

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