Monday April 21, 2008 - 13:33:17 GMT
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CEP News - www.economicnews.ca
UK Economy Heading for "Painful Adjustment", Says E&Y ITEM Club
06:22 04/21 (CEP News) London â€“ The UK economy is heading for a
"rapid and painful adjustment" over the next two fiscal years,
according to the Ernst & Young ITEM Club, a think-tank that
publishes many of its economic forecasts based on the same
methodologies as the countryâ€™s government.
In its latest
assessment of economic conditions published late on Sunday, E&Y
ITEM Club forecasts that UK growth will dip from 3.1% in 2007 to 1.8%
in 2008 and 1.5% in 2009 unless the government acts decisively.
It also expects house prices to fall by 10% in the next two years and
the number of people moving home to shrink by 40%, with a "bleak"
Additionally, the E&Y ITEM Club forecasts that with consumers being
less able to borrow money, growth in high street spending will dip from
3% in 2007 to just 1% in 2008 and 2009. However, employment is expected
to stabilize while manufacturing is forecast to benefit from the pound
sterlingâ€™s weaker exchange rate.
Dr. Peter Spencer, chief economic advisor to the E&Y ITEM Club,
said, "Although the UK economy has remained relatively buoyant so far
this year, our reliance upon international banking markets means it is
only a matter of time before it slows. This is going to be a rapid,
painful adjustment and it will be a rough ride for a substantial
proportion of the population."
Spencer believes that a massive sea change in the balance of the
economy was in the cards. He called on the government to be bold in
tackling the problems faced by the economy, even though a recession was
"Nonetheless, if the government does not take action, the risks are
plain to see, not just in the housing market and the high street. If
the pound sterling's recent retreat turns into a rout, this would
threaten a breakout of wage inflation, which could end 15 years of
successful inflation targeting," he concluded.
By Gaurav Sharma, [email protected], edited by Nancy Girgis, [email protected]
(END) Â©CEP Newswires - Â©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca
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