Recession to last until the summer



Britain will be in recession until next summer, according to an influential forecaster, as Whitehall officials battle to restore the UK’s credibility in global markets after weeks of turmoil.

The EY Item Club now expects gross domestic product to contract by 0.3 per cent next year, down from a previous estimate of 1 per cent growth, although the risk of a severe downturn has been mitigated by the government’s intervention on energy bills.

As the Treasury redrafts much of the so-called mini-budget that triggered market turbulence and prompted Liz Truss to sack Kwasi Kwarteng as chancellor and install the former foreign secretary Jeremy Hunt in his place, attention will return today to the bond markets.

Longer-dated gilts rallied on Friday as Kwarteng’s departure was confirmed. After intervening in the market in an urgent attempt to stave off a crisis in pension funds, the Bank of England also concluded its action after buying some £19 billion of gilts.

The EY Item Club expects the UK economy — which contracted by 0.3 per cent in August, according to the latest official figures — to shrink for nine months from this winter until the middle of next year, as factors including inflation, high energy prices, rising interest rates and weak global demand take their toll. The government’s action on energy bills for households and businesses is expected to help ensure the scale of the downturn is shallow in comparison with previous recessions, however, and the Item Club’s annual projection for growth this year has been upgraded from 3.7 per cent to 4.3 per cent after revisions to historical data by the Office for National Statistics.

Officials at the Bank of England are widely expected to order another interest rate rise next month, with markets pricing in a 57 per cent chance of a 75-basis point increase and a 42 per cent chance of a full percentage point. Inflation data for last month, due out on Wednesday, is expected to show that prices rose by about 10 per cent, five times the Bank’s target. Hywel Ball, UK chairman of EY, said: “Weak UK and global economic growth, the rising cost of capital goods and a world of higher-than-expected interest rates risk holding back the pace at which business investment will grow.”

The number of jobs available in London’s financial services industry fell by 30 per cent between the second and third quarters, according to research. The hiring slowdown was attributed by the employment specialist Morgan McKinley to the resurgence of summer travel and the period of national mourning in September, during which many companies put recruitment on hold. Hakan Enver, managing director, described it as a “month like no other”.

MakeUK, the industry lobby group, said that 57 per cent of manufacturers believed next spring’s rise in corporation tax will result in manufacturers investing less capital, citing a survey of 196 companies conducted in August.





Source link


Like it? Share with your friends!

What's Your Reaction?

hate hate
0
hate
confused confused
0
confused
fail fail
0
fail
fun fun
0
fun
geeky geeky
0
geeky
love love
0
love
lol lol
0
lol
omg omg
0
omg
win win
0
win
Administrator

0 Comments

Your email address will not be published. Required fields are marked *

Choose A Format
Personality quiz
Series of questions that intends to reveal something about the personality
Trivia quiz
Series of questions with right and wrong answers that intends to check knowledge
Poll
Voting to make decisions or determine opinions
Story
Formatted Text with Embeds and Visuals
List
The Classic Internet Listicles
Countdown
The Classic Internet Countdowns
Open List
Submit your own item and vote up for the best submission
Ranked List
Upvote or downvote to decide the best list item
Meme
Upload your own images to make custom memes
Video
Youtube and Vimeo Embeds
Audio
Soundcloud or Mixcloud Embeds
Image
Photo or GIF
Gif
GIF format