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UK economy tipped for weak recovery

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UK economy is tipped for a slow weak recovery

Gross domestic product (GDP) in the UK looks set to increase slightly before the end of the year, new estimates suggest.

Britain is officially going through a double-dip recession but the Ernst & Young ITEM Club believes gross domestic product actually went up during the second half of 2012.

This, it said, is because employment levels in the UK have been going up, while inflation has fallen, which means consumer demand has risen at a higher rate than many had anticipated.

Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, noted that a number of factors are having a negative effect on Britain's economy at the moment, including a deteriorating picture in China, India and the US, as well as the continuing debt crisis in the eurozone.

However, he suggested Britain's high street could potentially be in a position to "come to the rescue this year".

"The fundamentals are in place to enable this to happen," Mr Spencer observed.

"Inflation is coming back to heel, private sector employment is holding up and the housing market also looks poised for a revival."

This could potentially reinforce Britain's standing as a safe haven for investors across the globe and potentially encourage them to transfer money to the UK in the coming months.

According to the Office for National Statistics, Consumer Prices Index annual inflation dropped from 2.5 per cent in August to 2.2 per cent in the following month. The organisation said this is the lowest it has been in almost three years, as the figure stood at 1.9 per cent in November 2009.

The Ernst & Young ITEM Club believes Britain's economy will contract by 0.2 per cent during 2012 as a whole, with GDP going up by 1.2 per cent next year. The group then expects to see an upturn of 2.4 per cent taking place during 2014.

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