UK’ ailing economy needs cash pile

According to a research which will be published tomorrow by the Ernst and Young Item Club forecast group, Britain’s economy will stall, until a more sustainable recovery takes hold in 2013.

The forecasting body said while measures from the Bank of England, the European Central Bank and US Federal Reserve may have saved the UK from a double-dip recession, it is now companies’ turn to resolve the current economic crisis by investing.

“Business investment has picked up nicely in the US but UK companies remain extremely risk averse, which is sapping strength from the economy,” said Peter Spencer of York University, the author of the Item Club’s quarterly health-check of the economy.

“Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list.”

Moreover, Spencer warned that the country’s living standards will be squeezed by weak wage growth and high inflation until the middle of next year, insisting, “Households remain under the cosh and UK unemployment is set to go even higher by the end of the year.”

SSM/MF/HE

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