By IRNA,
London : Britain’s economy is not expected to fully recover from the current financial crisis for three years, according to a bleak report on the impact of an impending recession on the country’s “real economy.”
Ernst & Young Item Club said that the UK economy is already in recession after “deteriorated dramatically” in the past three months.
It forecast it will shrink by a further 1 per cent next year before starting to recover.
Its latest report Monday warned that widespread cuts in investment and employment are “inevitable.”
It predicted another 500,000 people will lose their jobs and that unemployment claims would hit 5 per cent by the end of 2009, double last year’s rate.
Consumer expenditure on everything from food, clothes, holidays, household bills, home improvements and entertainment was expected to fall 1.2 per cent next year and increase by just 0.2 per cent in 2010 before growing by 1.9 per cent in 2011.
The forecast on house prices was that they would fall by an average of 14 per cent by the end of 2008 and drop a further 10 per cent next year.
The report, the most gloomy assessment yet of how the impending recession will hit householders, was not seen as good news for Prime Minister Gordon Brown, who has to call a general election by May 2010 at the latest.
Recent opinion polls have show a recovery in the popularity of Britain’s Labour government but not enough to prevent the opposition Conservatives being returned to office for the first time in more than a decade.
Professor Peter Spencer, who authored the report, described the financial crisis as a virus spreading “like a pandemic” across the world.
“We desperately need a global solution given the heavy dependence of our banks and borrowers on cross-border banking flows,” Spencer warned, saying that the UK’s banking system was still “in intensive care” despite recent government intervention.