MercoPress. South Atlantic News Agency

UK economy recovery forecasted towards the end of 2011

Peter Spencer is Professor of Economics at the University of York and Economic Adviser to the Ernst & Young ITEM Forecasting Club

Prospects for the UK's economic recovery remain poor this year with output growth of 1% or less predicted in 2010, a leading forecaster has warned. It also suggested that although consumer spending is on the rise, it will remain too weak to sustain a recovery this year as consumers try to pay off debts as quickly as possible.

“Exports provide an opportunity to steer our way out of this situation, but ultimately business must put its shoulder to the wheel” Peter Spencer, the Ernst & Young ITEM Club's chief economic adviser, said in a report released Monday. He further pointed out that the immediate prospects for the UK economy remain dismal.

An export-led recovery was unlikely to emerge until 2011 and consumer spending was too weak for a recovery, the report said.

“The latest inflation and unemployment data will be watched eagerly by politicians and economists to see whether the recent downward trend is sustained in both cases,” it added.

Spencer said there were “good reasons to be optimistic” about overseas demand - such as the weak pound - but warned global trade was unlikely to regain its 2008 peak until the end of next year.

Ernst & Young also predicted that Britain's GDP will grow by 2.7% next year and 3.4% in 2012, “powered initially by exports and then investment”. The pound has dropped about 25% on a trade-weighted basis since the start of 2007, and UK businesses should take advantage of that, the group said.

British Prime Minister Gordon Brown is trying to narrow the opposition Conservatives’ lead in voter opinion polls ahead of the May 6 election by claiming his decisions will prevent a return to recession.