By
Daily Mail Reporter
Last updated at 12:59 AM on 27th December 2011
The British economy is facing a ‘bleak’ new year, with a real risk of a return to recession, a think-tank warns today.
The only good news for consumers is that inflation is expected to fall, which will ease the squeeze on spending power for those who remain in work, says the centre-left Institute for Public Policy Research.
In a New Year message, the think-tank’s chief economist Tony Dolphin says that with no solution yet found for the eurozone crisis and many European economies already back in recession, the risk is that a mood of austerity will stunt the UK’s growth too.
Forecasters, including the Bank of England, pictured think inflation will be closer to its target rate of 2 per cent by the end of 2012
‘As we enter 2012, it seems the word that best describes the outlook for the UK economy is ‘bleak’,’ he says.
‘The eurozone crisis is unresolved and country after country is being forced to adopt extreme austerity measures that will result in large falls in output.
‘As a result, the whole eurozone economy is believed to be back in a mild recession.
‘Going into 2012, the risk is that talk of austerity at home and crisis in Europe will dampen spirits to such an extent that the economy drifts into recession.’
In the case of a ‘double-dip’ recession, a return to growth will be possible only with a boost in public spending, a substantial increase in demand for British goods and services from overseas or if UK consumers and businesses are given a reason to spend more, says Mr Dolphin.
Some good news: Inflation is expected to fall which will ease the squeeze in spending power
‘The first is not going to happen, the second is extremely unlikely, and so we are left with the third,’ he says.
‘But with no prospect of tax cuts or lower interest rates, it is not clear what in the short-term the catalyst for more spending by the private sector will be.’ The institute is calling on the Government to do more to boost the economy, including by bringing forward the establishment of a national investment bank, which it wants to be operating by the end of 2012.
Mr Dolphin adds: ‘The only good news is that a weaker global economy has led to lower global inflation pressures.
‘Forecasters, including the Bank of England, think inflation will be close to its target rate of 2 per cent by the end of 2012… there is nothing in the latest data to suggest an alternative outcome is more likely.
‘Even if wage inflation only stays at its current level – around 2 per cent to 2.5 per cent – the squeeze on households’ spending power will end, at least for those who keep their jobs.
‘In the short-term, economic policy has become a matter of hoping that something turns up.
‘That is why, for the UK economy, 2012 is unlikely to be a happy new year.’
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We need idiots to tell us what we already know. – Royston Amphlett, Bournemouth England, 27/12/2011 ——- Apparently, and very expensive idiots at that.
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We need idiots to tell us what we already know.
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All together now as we ride the Tory double dip roller coaster of recession.
Coming soon to all homes in 2012!
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These people should stop spouting about Britain falling back in to recession, because it’ plays a big part in the cause of the continued problem. Talking so much about it keeps the pound in a weak position so, SHUT IT.27/12/2011 01:29//////// Do you refer to politicians or to people? Our media continues mislead people, the government does not make readily available the facts and figures without trying to gloss it all up. When it comes to matters, concerning our future and prosperity, we are the least informed. ill-informed people make ‘snap’ judgement without understanding what is best for them. There is a very famous saying that sums it up “When governments fear the people, there is liberty. When the people fear the government, there is tyranny”. You can’t shut everyone, look around, it’s not only us. Rather put your effort into doing something worthwhile, leading you and us to a better quality of life.
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It`s people like these that help to keep countries in recession. It`s an easy thing to say. It`s what they say to justify their existence. You or I could say it. Ignore them.
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Never mind at least the nights are getting lighter
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unfortunately, we grew way wealthier than we should have been thanks to free debt creating a bubble and so we will need to wait for natural growth to catch up to where GDP currently sits (or for current GDP to fall back to the right levels). Wish it weren’t so, but I agree with the economists – it’s not going to be pretty… too much debt (gov, ppl, companies), too much waste (faux degrees, weakened education, bloated public sectors), decadence (social engineering, weakened family units) have developed excessively over the last 20 years and now we have to purge it in a painful way. This is the hangover after the mother of all debt binges. I just hope we don’t end up in a deflationary environment like Japan!
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These people should stop spouting about Britain falling back in to recession, because it’ plays a big part in the cause of the continued problem. Talking so much about it keeps the pound in a weak position so, SHUT IT.
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We left the recession?
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i buy value goods to make all my meals, i have cut meals down to about half what they were before and i walk to work rather than bus as it saves 3.40 a day. I have no more cuts in my monthly budget i can make…
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