The UK may have already slipped back into recession and is likely to see unemployment hit just under three million over the year ahead, several economic think tanks have warned.
The latest quarterly forecast from the Ernst & Young ITEM Club indicates that the country's Gross Domestic Product will 'flatline' for the rest of year due to political uncertainty in the Eurozone. Deteriorating levels of confidence will also see business investment stagnate in 2012, while export prospects have already slowed.
Professor Peter Spencer, chief economic advisor to the ITEM Club, said: “Figures for the last quarter of 2011 and the first quarter of this year are likely to show that we are back in recession and we are going to have to wait until this summer before there are any signs of improvement."
But the situation was not going to be a repeat of 2009 and the country would not experience a serious double dip, he added.
"This time round, UK Plcs have strong balance sheets and have built up large cash stockpiles, which will provide a useful insurance policy if the situation deteriorates further," Spencer said. "Business spending has already been cut back heavily. However, with business confidence faltering, investment and recruitment are likely to remain on hold until stability returns.”
According to the report, the UK is probably already in a technical recession and will struggle to reach positive growth until 2013. It also forecast that the country would see economic growth of only 0.2% this year, before experiencing a 1.8% increase in 2013 and 2.8% in 2014.
As a result, unemployment is likely to jump by a further 300,000 to hit three million in the first half of 2013 – representing a huge 9.3% of the total workforce. The Centre for Economics and Business Research likewise forecast that joblessness would "rise sharply" to about three million in 18 months time as companies "batten down the hatches for the long-term and revise their medium expectations of labour requirements".
This meant that unemployment, which stood at 8.3% in September would likely peak at about 9.5% in 2015, it added.
