The UK economy is set to grow by just 0.7 per cent this year, according to the latest forecast from the National Institute of Economic and Social Research (NIESR). The forecast is well below that of the Chancellor's official budget watchdog, the Office for Budget Responsibility, which sees growth of 1.2 per cent in 2013. For 2014 NIESR predicts growth of 1.5 per cent, versus the OBR forecast of a 2 per cent expansion.
The think tank urged the Chancellor to adopt a new fiscal strategy to pep up the economy. "It remains our view that such a recovery would best be supported by a significant increase in public sector net investment, with looser fiscal policy in the short term while demand remains weak," it said.
There was further evidence that the new year had got off to a uninspiring start yesterday with a survey from the Chartered Institute of Purchasing & Supply (Cips) showing that construction output sank for the third straight month in January.
The impact of snow across much of the country and another month of falling new business left the Cips activity index unchanged at 48.7, below the 50 neutral mark.
Cips said that housebuilding remains in the doldrums and civil engineering saw its first fall in activity for four months, although commercial building is holding its own.
The Barclays Capital analyst Blerina Uruci said: "We expect construction activity to remain subdued during 2013 as the weakness in new orders is likely to continue."
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