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October 18, 2010    

Think tank: Double dip unlikely but tough times ahead

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by Kay Murchie
”Think

Respected economic forecaster, the Ernst & Young Item Club, has today warned of a gloomy outlook for consumers but a double-dip recession is unlikely.

The think tank said economic growth will be hampered due to massive spending cuts - introduced by the Government to tackle the budget deficit.

The Ernst & Young Item Club is forecasting that the UK economy will grow by 1.4% this year and 2.2% in 2011.

Meanwhile, the group added it was not surprised that the Bank of England is considering injecting more money into the economy via its quantitative easing (QE) scheme.

Peter Spencer, chief economic adviser to the Item Club, said the economy is in for a “soft-patch“ but not a double-dip.

Mr Spencer adds that UK households face a “tough time” with stubbornly high inflation and massive spending cuts, which will include tax hikes.

The Item Club concluded that looking forward, a marked improvement will not be seen until the end of 2011.

As the spending cuts take hold, which will include substantial job losses within the public sector, the Item Club warns that unemployment will edge up to just above the 8% mark by mid-2011 before steadily falling back thereafter.

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