As global stock markets brace themselves for aftershocks following Friday night?s downgrades of the credit ratings of nine eurozone nations including France, the Ernst & Young ITEM Club will say in its winter forecast published tomorrow that falling disposable incomes, higher unemployment and stagnating business investment will all weigh on the British economy in 2012.
?Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement,? said Peter Spencer, chief economic advisor to ITEM.
?But it?s not going to be a repeat of 2009; we are not going to see a serious double dip,? he added.
Mr Spencer said British companies were in better shape this time around, with stronger balance sheets and better cash positions as insurance against a further downturn. But he estimates business investment fell by 2.6pc in 2011 and will grow by just 0.4pc in 2012.
ITEM is forecasting that in the absence of a eurozone shock, the UK economy will just about scrape growth of 0.2pc this year, before growing 1.8pc and 2.8pc in 2013 and 2014 respectively. Unemployment is expected to rise sharply to almost 3m in the first half of 2013, from a current level of 2.64m.
The stark warning came as rating agency Standard & Poor?s warned the chance of a recession in the eurozone area has now hit 40pc.
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