The National Institute of Economic and Social Research has slashed its forecast for UK growth in 2013 to 0.7 per cent.
This is down from the 1.1 per cent the group forecasted in November 2012. The UK’s underlying economic performance is described by the institute as “flat”, following a year of zero growth in 2012.
It describes current UK growth as “the slowest post-recession recovery output in the past 100 years”, with the economy only having grown by 0.5 per cent between the third quarter of 2010 and the end of last year.
GDP is approximately the same as two years ago, remaining more than 3 per cent below the 2008 peak. It is not expected to reach peak again until 2015. Per capita GDP actually fell by 1 per cent over the same period and is not expected to regain its pre-recession peak until 2018.
“Recovery depends upon a resumption of consumer spending, while balanced recovery also requires the resumption of corporate spending and a pick-up in export growth,” the NIESR says.
Data from the Office for National Statistics shows the UK’s trade deficit on trade was estimated to have been £3.5 billion in November, narrowing from £3.7 billion in October.
A CBI survey also shows that 17 per cent more retailers saw better sales at the start of January. While this was broadly the same as December, it was significantly lower than what was seen in October and November 2012.
Increased net investment from the public sector and radical reform in the financial sector are needed to support this recovery, the NIESR adds. Short-term, looser fiscal policy is also required while demand remains week, with a new fiscal framework should commit to fiscal consolidation in the long term.
The latest figures from the ONS show GDP as contracting by 0.3 per cent in the final quarter of 2012. The NIESR says the immediate concern should be on if the UK economy can escape stagnation throughout 2013 rather than if the country is at risk of triple-dip recession.
“Overall, the concern should not be whether or not the economy shrank slightly at the start of 2013 to fulfil the ‘technical’ definition of recession, or whether (as we expect) there is slight growth; but on the broader question of whether stagnation persists throughout 2013.”