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UK to continue to struggle until next year

UK to continue to struggle until next year

Category: Economy

Updated: 02/01/2018
First Published: 16/04/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The UK will struggle on this year, with only a minor increase in output, before a more sustainable recovery next year, it has been predicted.

The Ernst & Young Club said that the UK has been saved from another recession – measured by two consecutive quarters in which the UK's GDP falls – by monetary policy.

However, the economy is expected to stutter over the rest of 2012, with growth predicted to be 0.4% this year, rising to 1.5% next year.

By comparison, the Office for Budget Responsibility thinks the UK will see GDP increase by 0.8% this year and 2% in 2013.

Unemployment is to peak at 9.3% of the UK's total workforce by the middle of next year, with just short of 3 million people out of work, before beginning to fall back.

As such, household spending looks set to increase minimally this year, before accelerating to 1.1% in 2013 as household incomes gradually strengthen.

"Households remain under the cosh and UK unemployment is set to go even higher by the end of the year," said Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club.

"But there is a small glimmer of light at the end of the dole queue. For the first time in years, the gap between wage growth and inflation should start to close, before reversing in 2013.

"This will feed through to the tills on the high street and will be given an additional boost by the Olympics. But make no mistake; consumers can't lead this recovery."

"After three business-friendly Budgets and more tax cuts in the pipeline, it's now up to corporates to play their part in the UK's recovery.

"The business community needs to grasp this opportunity quickly or face the consequences after the next general election."

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