UK 'faces decade of economic pain,' says Ernst & Young ITEM Club report
Posted by BusinessIntelligence Middle East
Source: BI-ME and UKPA , Author: BI-ME staff
Posted: Sun January 17, 2010 10:41 pm


INTERNATIONAL. A leading economic forecaster is set to warn that the UK faces a decade of pain after a massive debt binge, it has emerged.

The Ernst & Young ITEM Club report, which bases its forecasts on official Treasury models, predicts that growth will struggle to reach 1% in a "challenging year".

Chief economic adviser Peter Spencer said: "We are no longer in a position to borrow - the massive debts that we racked up in the last decade now need to be repaid."

Official figures due later this month should confirm a pull out of recession in the final three months of 2009 but ITEM put this down to emergency measures such as the 'cash-for-bangers' scrappage scheme.

"Once the effects of these temporary stimuli have worn off, it is difficult to see where the growth is going to come from in the short-term," Mr Spencer added.

ITEM said the country had to boost exports over the long-term to avoid the risk of economic stagnation.

"It is vital the UK rejuvenates its overseas investment model and starts selling into countries such as China, where we have an exceptionally low market share compared to our leading competitors."

Interest rates have been at a record low of 0.5% since March last year and the forecaster expects them to remain at this level until "well into 2010".

ITEM added that it "remained concerned" over the UK's dire public finances, with net borrowing set to soar to a record £178 billion this year due to the impact of recession.

The forecaster said official forecasts were based on "very optimistic" assumptions for tax revenues and growth, while the Chancellor had also failed to set out "credible" plans for fiscal consolidation.

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