Independent body the Ernst and Young ITEM
club has warned that the UK economy has stalled and that the recent round of quantitative easing by the Bank of England was unlikely to help recovery.
The uncertainty of the Eurozone and slowing worldwide growth is having an impact on confidence. Also it has downgraded the forecast for gross domestic product (GDP) from 1.4% which it only predicted three months ago, to 0.9% this year. More positive is its prediction that in 2012 it should increase to 1.4% but this is down on its earlier prediction that it would be 2.2%.
Peter Spencer who is the chief economic adviser to the ITEM club said “It’s worse than we thought. The bright spots in our forecast three months ago – business investment and exports – have dimmed to a flicker as uncertainty around Greece and the stability of the Eurozone increases.
“We think there is scope for targeted tax relief and spending measures to help put us back on track. In the meantime, businesses need to be much more aware of the economic risks and have contingency plans in place given the current volatility.”
In order to restore confidence and increase growth they say that action should include cutting interest rates from 0.5% to 0.25% and a reduction in stamp duty for first time buyers. It also warns that unemployment will increase from 2.57 million to 2.7 million over the next eighteen months.
