The UK is set for among the slowest growth in Europe according to the new forecasts. New research by the European Commission shows that only Greece, Italy, Portugal and Cyprus will grow more slowly in 2011.
The new report (pdf), published yesterday, warns UK growth will be just 0.7 per cent in 2011. The chart below compares growth predictions for 2011 for each of the 27 countries in the European Union, plus China, Japan and the US.
The UK section of the report (pdf) explains:
“It has been clear for some time that domestic demand growth in the coming years would be weak.
“With government consumption falling, consumers struggling with falling real incomes and the stock cycle having peaked, the only bright spot on the horizon was business investment which is overdue a rebound after its unprecedented collapse during the recession.
“The surprise has been the degree of weakness in household consumption, which was 1.7% lower in the second quarter of 2011 than in the same period in 2010.”
UK growth for 2012 is predicted to be 0.6 per cent. In addition to the countries listed above, the Netherlands and Hungary are expected to grow more slowly but 19 EU countries will grow at a faster pace in 2012 including Ireland at 1.1 per cent and Spain at 0.7 per cent; unemployment, meanwhile, is expected to rise to 8.6 per cent from 8.1 per cent at present.
In 2013, unemployment is expected to stay relatively flat at 8.5 per cent while growth will rise to a sluggish 1.5 per cent.
The Office of Budget Responsibility is currently predicting growth in 2011 of 1.7 per cent, 2.5 per cent in 2012, and 2.9 per cent in 2013 although this is likely to be significantly downgraded later this month.
And while all their remedies may not be to everyone’s liking, a group of “30 of the City’s top figures” have joined the call for a Plan B. In a letter to the chancellor, published in the Daily Telegraph, senior business leaders are calling for the immediate scrapping of the 50p tax, raising the tax threshold by £1,000, and bringing forward infrastructure spending. The total cost of the package would reach several billion pounds.
• Osborne’s cuts having “damaging effect” on Northern Ireland peace process – Kevin Meagher, November 10th 2011
• New report dubs Osborne’s economic strategy a “myth” – Ed Jacobs, November 9th 2011
• “Underlying picture remains weak”, “paltry”, “bumping along the bottom” – growth reaction – Shamik Das, November 1st 2011
• Ignore Osborne’s spin; a jobs recession is inevitable – Tony Dolphin, November 1st 2011
• Fast spending cuts push economy from fastest quarterly growth for a decade towards zero – Cormac Hollingsworth, November 1st 2011