The Office for Budget Responsibility has cut its 2012 UK growth forecasts from 0.8 per cent to a contraction of 0.1 per cent.
The OBR also cut its 2013 growth rates from 2 per cent to just 1.2 per cent while 2014 OBR growth predictions fall to 2 per cent from 2.7 per cent.
In 2015, the UK economy is expected to grow 2.3 per cent, compared to previous estimate of 3 per cent, in 2016 it will grow by 1.7 per cent, compared to previous estimate of 3 per cent.
Delivering his autumn statement, chancellor George Osborne said the OBR is clear that the growth forecasts have been cut because of reduced trade with the Eurozone.
He said: “The economy has performed less than expected. The OBR thought the Eurozone would have recovered but instead it has contracted.”
Osborne also extended austerity by another year into 2018, missing his target of eliminating the deficit by 2015 by three years. During last year’s autumn statement he announced two more years of cuts.
The OBR predicts the deficit will be 6.1 per cent in 2013/14, 5.2 per cent in 2014/15, 4.2 per cent in 2015/16, 2.6 per cent in 206/17 and 1.6 per cent in 2017/18.
Borrowing is also due to fall in every year for six years from £108bn in 2013/14, £99bn in 2014/15, £88bn in 2015/16, £73bn in 2016/17, £49bn in 2017/18 and £31bn in 2018/19.