UK narrowly avoids a double-dip recession - Business News - Business - The Independent

UK narrowly avoids a double-dip recession

 

The UK has narrowly avoided a double-dip recession but will struggle for the rest of the year unless businesses stop hoarding cash and start investing, a forecaster warned today.

Emergency measures from the Bank of England, European Central Bank and US Federal Reserve have boosted confidence and stabilised financial markets, pulling the UK back from the brink of recession, the Ernst & Young ITEM Club said.

The ITEM Club has forecast that UK GDP growth will be a “dismal” 0.4% this year, which is half the 0.8% estimated by the tax and spending watchdog, the Office for Budget Responsibility, before rising to 1.5% in 2013 and 2.6% in 2014.

The UK economy shrank by 0.3% in the final three months of last year and is broadly expected to have just avoided a technical recession by eking out around 0.1% to 0.2% in the first quarter of 2012.

Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said the UK will not prosper again until businesses invest stockpiled cash.

He said: “Business investment has picked up nicely in the US but UK companies remain extremely risk averse, which is sapping strength from the economy.”

The cash balances of private non-financial companies are worth more than £754 billion, the ITEM Club said, 50% of GDP, but business investment last year only increased by 1.2%.

In contrast to big business, households remain under intense pressure, the ITEM Club said, with private sector companies finding it increasingly difficult to create the jobs to offset losses in the public sector.

Unemployment is expected to approach 9.3% of the UK's total workforce by the middle of next year, with just short of three million people out of work, before beginning to fall back, the ITEM Club said.

Mr Spencer continued: “Households remain under the cosh and UK unemployment is set to go even higher by the end of the year.

“But there is a small glimmer of light at the end of the dole queue. For the first time in years, the gap between wage growth and inflation should start to close, before reversing in 2013.”

ITEM forecasts that disposable income will fall by 0.2% in 2012, while consumer spending will increase by 0.8% before accelerating to 1.1% in 2013 as household incomes gradually strengthen.

Elsewhere, the ITEM Club has predicted that the UK's export performance should pick up despite shipments to the eurozone being restrained.

Exports of goods increased by 5.1% in volume terms in 2011, while services were up by 3.9%. The UK is expected to put in a similar performance this year, the ITEM Club said, with exports growing by 4.5% and net exports adding 0.3% to GDP.

Mr Spencer said: “The UK has so far avoided the dreaded double dip, but a lot still hangs in the balance.

“After three business-friendly Budgets and more tax cuts in the pipeline, it is now up to corporates to play their part in the UK's recovery.

“The business community needs to grasp this opportunity quickly or face the consequences after the next general election.”

PA

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
Arts and Entertainment
Emma Thompson and Bryn Terfel are bringing Sweeney Todd: The Demon Barber of Fleet Street to the London Coliseum
theatre

Returning to the stage after 20 years makes actress feel 'nauseous'

News
peopleThe Times of India said actress should treat it as a 'compliment'
PROMOTED VIDEO
Property
Home body: Badger stays safe indoors
property
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise

Undergraduates will be able to study beatboxing and performance poetry at one of Europe’s leading conservatoires for the first time, after the Guildhall School of Music and Drama revealed plans for a “groundbreaking” degree course.

Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week