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Recession Threat in the ‘Next Two Years’
(28-01-08) - Reports warn that the UK economy is about to experience its slowest growth since 1992, prompting fears of a period of recession by summer 2009.
The report, commissioned by the Deloitte Economic Review, puts the housing market at the forefront of this downturn, with prices already falling at an average of 5% this year.
The global credit crisis was highlighted also; borrowing criteria will narrow throughout 2008 and exclude many who previously relied on credit for everyday purchases. Somewhat pessimistically, the report also pointed to the possibility of employers succumbing to increasing financial pressure by ‘wielding the axe’ more readily.
Roger Bootle, Deloitte’s economic adviser, had the following to say:
‘The global financial crisis and the associated credit crunch have brought an end to the period of easy credit that in recent years has been the bedrock of rapid rises in house prices.’
He continues:
‘I expect house prices to fall by 8% in 2009'
Despite expectations that the European economy will stabilise in 2008, this will not be enough to offset massive holes in the US economy.
It’s unlikely that the rapidly emerging economies of India and China will be able to bail the UK economy out. The two countries account for less than 5% of all UK exports.
Chris Eagle, Commercial Manager at CreditChoices, points to a relatively propitious rate of inflation as a reason to be cheerful amongst the financial gloom:
‘The current climate of stable inflation allows UK financial policymakers enough leeway to cut interest rates if necessary, thus staving off the threat of inflation for the time being. The UK economy will continue to grow over the next two years, and although this growth will continue at a reduced pace in comparison to last year, growth in 2007 was the fastest in four years. A slowdown is inevitable, but not necessarily fatal for the economy.’
