World's biggest economies 'grinding to a halt'

Chancellor George Osborne today blamed negative international factors for the slowdown in the British economy, as a respected global think-tank predicted UK growth will stutter to a near-halt over the coming months.

The Organisation for Economic Co-Operation and Development (OECD) forecast annualised growth of just 0.3% for the UK in the final quarter of 2011, in a report which painted a gloomy picture of prospects for most of the world's biggest economies.

If it turns out to be correct, the OECD's forecast would complete a steep decline in annualised growth from 2.5% in the third quarter of 2010 to 0.7% in the second quarter of 2011, 0.4% between July and September and 0.3% in the last three months of this year.

In a mark of continuing concern over the sluggish recovery, the Bank of England's Monetary Policy Committee again held interest rates at a record low of 0.5% today, though the bank held off from printing more money to stimulate the economy through "quantitative easing".

Shadow chancellor Ed Balls called on Mr Osborne to ease up on austerity measures in the hope of bolstering fragile demand and said the Chancellor should use this weekend's meeting of G7 finance ministers in France to seek agreement on a global plan for growth.

But Mr Osborne said that the argument that slower-than-expected growth was caused by the Government's deficit reduction programme was "for the birds".

Instead, he said that countries throughout the world were being affected by factors beyond Britain's control, such as high oil prices, the sovereign debt crisis in the eurozone and concerns about growth in the US.

"The forecasts we got from the OECD today show that this is a problem for many advanced economies. There was a revision down in their forecast for growth for virtually every developed economy," said the Chancellor.

"We can look at the various short-term problems... but actually the real issue here is the long-term one, which is the big overhang of public and private debt from a decade-long boom that went unchecked.

"Unfortunately, the recovery from this is slower and takes longer than recoveries from previous recessions.

"I think Britain has put in place the right policy mix."

The OECD interim economic assessment is designed to check if projections made in its last economic forecast are on track. In May, the body downgraded its estimate for UK GDP growth in 2011 to 1.4% and 1.5% for 2012.

While OECD chief economist Pier Carlo Padoan encouraged governments to continue with fiscal tightening, he encouraged them to ease up when possible.

Mr Padoan admitted world economic growth was turning out to be much slower than the body thought it would be three months ago.

He said: "There's a clear drop in confidence in both business and households which reflects what they see as lack of policy response from governments."

The OECD recommended that central banks keep policy rates at present levels and, barring signs of recovery, consider lowering rates when there is scope.

World trade stagnated in the second quarter, according to the assessment, partly due to supply disruptions in the fallout of the earthquake and tsunami in Japan.

There is a risk of high unemployment becoming entrenched, the think-tank warned, and governments should roll out policies to create jobs.

Looking ahead, growth levels are muted across the G7 nations, with Germany forecast to experience a 1.4% decline in GDP in the fourth quarter.

The dismal outlook for Germany is significant as the country was until recently leading the recovery in Europe with strong levels of GDP growth.

But figures suggest the country's economy is losing steam as GDP growth in the second quarter dropped to 0.2% on a quarterly basis.

A healthy UK economic recovery is dependent on the rest of the continent as Europe is the country's biggest trading partner.

Mr Balls said: "A year ago, while the Chancellor was saying he was cautiously optimistic and Britain was out of the danger zone, I warned that there was a hurricane building and this was not the right time to rip out the foundations of the house.

"And I am even more worried now about Europe, America and Britain than last summer.

"This is now a critical moment for the world economy. We urgently need some leadership from our Chancellor and the G7 meeting this weekend to agree a global plan for growth and more balanced plans to get deficits down in the medium term."

TUC general secretary Brendan Barber said: "It looks like the best we can hope for is bumping along the bottom for years to come.

"Spending cuts are choking off recovery. The UK, US and Europe must embrace policies for investment and growth rather than hoping someone else will."


A model of a Neanderthal man on display at the National Museum of Prehistory in Dordogne, France
Richard Dawkins dedicated his book 'The Greatest Show on Earth' to Josh Timonen
newsThat's Richard Dawkins on babies with Down Syndrome
Arts and Entertainment
Eye of the beholder? 'Concrete lasagne' Preston bus station
architectureWhich monstrosities should be nominated for the Dead Prize?
ebooksAn evocation of the conflict through the eyes of those who lived through it
Dinosaurs Unleashed at the Eden Project
Arts and Entertainment
Life and Style
This month marks the 20th anniversary of the first online sale
techDespite a host of other online auction sites and fierce competition from Amazon, eBay is still the most popular e-commerce site in the UK
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Quantitative Analyst (Financial Services, Graduate, SQL, VBA)

£45000 per annum: Harrington Starr: Quantitative Analyst (Financial Services, ...

Application Support Engineer (C++, .NET, VB, Perl, Bash, SQL)

Negotiable: Harrington Starr: Application Support Engineer (C++, .NET, VB, Per...

AIFMD Business Analyst / Consultant - Investment Management

£450 - £600 per day: Harrington Starr: AIFMD Business Analyst / Consultant - I...

Business Analyst Solvency II SME (Pillar 1, 2 & 3) Insurance

£450 - £600 per day: Harrington Starr: Business Analyst Solvency II SME (Pilla...

Day In a Page

Middle East crisis: We know all too much about the cruelty of Isis – but all too little about who they are

We know all too much about the cruelty of Isis – but all too little about who they are

Now Obama has seen the next US reporter to be threatened with beheading, will he blink, asks Robert Fisk
Neanderthals lived alongside humans for centuries, latest study shows

Final resting place of our Neanderthal neighbours revealed

Bones dated to 40,000 years ago show species may have died out in Belgium species co-existed
Scottish independence: The new Scots who hold fate of the UK in their hands

The new Scots who hold fate of the UK in their hands

Scotland’s immigrants are as passionate about the future of their adopted nation as anyone else
Britain's ugliest buildings: Which monstrosities should be nominated for the Dead Prize?

Blight club: Britain's ugliest buildings

Following the architect Cameron Sinclair's introduction of the Dead Prize, an award for ugly buildings, John Rentoul reflects on some of the biggest blots on the UK landscape
eBay's enduring appeal: Online auction site is still the UK's most popular e-commerce retailer

eBay's enduring appeal

The online auction site is still the UK's most popular e-commerce site
Culture Minister Ed Vaizey: ‘lack of ethnic minority and black faces on TV is weird’

'Lack of ethnic minority and black faces on TV is weird'

Culture Minister Ed Vaizey calls for immediate action to address the problem
Artist Olafur Eliasson's latest large-scale works are inspired by the paintings of JMW Turner

Magic circles: Artist Olafur Eliasson

Eliasson's works will go alongside a new exhibition of JMW Turner at Tate Britain. He tells Jay Merrick why the paintings of his hero are ripe for reinvention
Josephine Dickinson: 'A cochlear implant helped me to discover a new world of sound'

Josephine Dickinson: 'How I discovered a new world of sound'

After going deaf as a child, musician and poet Josephine Dickinson made do with a hearing aid for five decades. Then she had a cochlear implant - and everything changed
Greggs Google fail: Was the bakery's response to its logo mishap a stroke of marketing genius?

Greggs gives lesson in crisis management

After a mishap with their logo, high street staple Greggs went viral this week. But, as Simon Usborne discovers, their social media response was anything but half baked
Matthew McConaughey has been singing the praises of bumbags (shame he doesn't know how to wear one)

Matthew McConaughey sings the praises of bumbags

Shame he doesn't know how to wear one. Harriet Walker explains the dos and don'ts of fanny packs
7 best quadcopters and drones

Flying fun: 7 best quadcopters and drones

From state of the art devices with stabilised cameras to mini gadgets that can soar around the home, we take some flying objects for a spin
Joey Barton: ‘I’ve been guilty of getting a bit irate’

Joey Barton: ‘I’ve been guilty of getting a bit irate’

The midfielder returned to the Premier League after two years last weekend. The controversial character had much to discuss after his first game back
Andy Murray: I quit while I’m ahead too often

Andy Murray: I quit while I’m ahead too often

British No 1 knows his consistency as well as his fitness needs working on as he prepares for the US Open after a ‘very, very up and down’ year
Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home