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Hopes of economic recovery in the UK are “running ahead of reality”, a leading think-tank warned today as it forecast the deepest recession since the end of the Second World War.
The Ernst & Young Item Club said the UK economy will shrink by 4.5% this year, the biggest fall since 1945 and considerably worse than the 3.5% decline forecast by the Government.
It also predicted a return to modest growth of 0.5% in 2010 but warned any recovery could be short lived, particularly if the swine flu outbreak worsens.
“Unfortunately, it is hard to see any very solid grounds for sustained optimism at the moment,” said Professor Peter Spencer, chief economic adviser to Item.
“The economic patient has been in trauma but thanks to the paramedics at the Treasury and the Bank of England, who pumped billions of pounds worth of medicine into the economy, the patient has stabilised for now.
“It remains unclear how quick and complete recovery will be, and there is still a serious chance of relapse.”
Item said although the worst of the recession may have passed, there could be a “double-dip”, where the economy stabilises before contracting again.
Spencer said the continued lack of bank lending to businesses and consumers was behind the depressing outlook.
“There is currently little sign of any extra lending to either companies or consumers,” he said. “Banks are saying that they will expand lending more aggressively over the next three months, but it seems unlikely that they will be able to meet the demand for credit.”
Official figures on Friday are likely to show the economy shrank again in the second quarter of the year, from April to June, having plummeted 2.4% in the first quarter. George Buckley of Deutsche Bank reckons output fell 0.5%, the fifth quarter of decline in a row. Howard Archer of Global Insight is slightly more optimistic, forecasting contraction of 0.3%.
Item warned the outlook for the economy could be even worse due to swine flu. It said the economy could shrink by an astonishing 7.5% this year if the swine flu outbreak reaches the worst-case scenario. A severe outbreak could dash any early recovery, potentially hitting output next year by another 1.7%. The summer forecast by Item said businesses will be left without sick employees while spending would fall as people stay away from public places to avoid infection.
The report also warned swine flu could tip the economy into deflation.
It said: “Perhaps the most worrying aspect of an H1N1 epidemic is that it would reinforce the downward effect of the recession on inflation.
“With the western world still teetering on the brink of deflation it is not an exaggeration to say that a pandemic on this scale could tip it over the edge.”
Reader views (14)
Cont.
Little known but true (Michael Osterholm, director of the Center for Infectious Diseases Research and Policy at the University of Minnesota – 16.07.09).
I have been stopped from putting these comments and facts out by the media before. Let’s hope that minds are fully opened now and that the real solution can be heard and not just the bottom-line for drug companies!
Dr David Hill
- Dr David Hill, Huddersfield, UK
CONT.
But, these figures could well be higher, as rapid world transit now makes for faster and wider transmission than in 1918.
I therefore say lets start now as I have been saying for the past three years and defeat this mass killer like no other by field work and not the futile drugs strategy that will do very little indeed to save lives. For presently we are all fooling ourselves.
If we put only £50 billion into this field work globally ( a small price for the human nightmare and financial melt-down that a global equivalent to Spanish flu would bring),we could eradicate the situation but where this £50 billion will no doubt end up alternatively in the pockets of the large pharmaceutical companies with little effect whatsoever. Get real everyone before it is basically too late and I am not joking – force governments to change their strategies from something that is impotent presently to something that will eradicate the problem at source. Common sense really but where currently no one seems to have any.
Worryingly also is the fact that as examples of other problems on the horizon is that the United States makes only 20 percent of its flu vaccines it uses and my country Britain makes zero percent of its flu vaccines, as all its flu vaccines are produced abroad. When a killer pandemic happens it will be hard for the producing countries to release any before their own people are serviced. Little known but true (Michael Osterholm, director of the Center for Inf
- Dr David Hill, Huddersfield, UK
CONT.
The only way that this deadly killer can be stopped therefore, if anyone is listening out there, is through a complete overhaul of modern farming and husbandry methods and to give considerable financial help to those who breed the livestock that we all eat. Basically as a single example, just stop them sleeping with the animals on cold nights in the tropics as this is how the flu virus passes from pig to chicken to man – eventually; and where the pig is the receptive incubator. Simply give them a heater and fuel, a much cheaper option that global suicide in both human and econmic terms as it will be. For the ‘Tropics’ are where some of the most eminent virologists and micribiologists in the field say is the place where the killer virus will emerge.The philosophy of not letting it happen in the first place. The drugs strategy is futile and it is only a matter of time before the killer strain that will kill literally 100s millions appears. The problem is that the vast profits of drug companies and the government's ignorance to the real facts will be the nails in all our coffins. The statistics and potential speak for themselves,
World Population 2 billion – 1920
Range of deaths
20mil/2billion = 1 in 100
100mil/2billion = 5 in 100
World Population now at 6.8 billion now equates to,
1 in 100 - 70 million min. today
5 in 100 - 340 million max. today
- Dr David Hill, Huddersfield, UK
Swine flu if it mutates in the Autumn will be devastating. But the problem is that no one listens, including the media. Swine flu if it mutates to something equivalent to the Spanish flu of 1918/1919 (Spanish flu was a swine flu variant) has the same potential to kill humans on an unprecidented scale as it did 90 years ago. The problem is that both swine and avian are constantly mutating into something different. So by the time you have isolated and made a vaccine for the last one, it has changed again and circumvented the old guard and becomes useless. The problem is that this happens all the time and where drugs become irrelevant. The reason, it takes three months to develop an antidote and 6 months to mass produce and distribute it (a logistic nightmare in itself alone) and where on average therefore the vast majority have to wait 9 months for the cure. The problem is that even in slow coach travel times 1918, the Spanish flu which took between 20 and 100 million lives worldwide (there is no authoritive number but where it is estimated between the two), did its deadliest between week 14 and week 26, some 12 weeks at least before the masses would ever receive the drug cure presently. The 1918 killer flu had a very similar circumstance as today, a mild version before the deadly version arrived in the fall of 1918 with a vengeance. The only way that this deadly killer can be stopped therefore, if anyone is listening out there, is through a complete overhaul of modern farming
- Dr David Hill, Huddersfield, UK
It seems we have a never ending flow of financial analysis from an never ending army of so called experts.
Goodness knows who pays them all.
Where were they all before the financial crisis – certainly not stopping it happen – perhaps it’s easy to be wise after the event.
- Roy Hicks, Watford England
It seems to me that you have a queue in the UK of profits of 'doom and gloom' with a competition on seeing who is able to give the worst prognosis of the UK economy!!!It seems just a short while ago that the cry was that a good number of persons were not able to place their foot on the ladder of house purchase as the prices of houses were out of their reach!!!If these, so called, experts have the answers then why did that not try to avoid the current economic crisis!!? Time has come for these persons to refrain from articulate expression and pull their sleeves up and get down to some honest work and get the UK in better shape!!!
- Arthur Lincoln, Roeselare, Belgium
Government would rather give £1Billion in aid to India, rather than properly fund British troops in a war situation in the Middle East.
- William, Hay~Heath UK
You people need to send home all those illiterate foreigners and deportees who have found their way into England then your country would be better off as they are only there to sell drugs.
- Sophi - Ann, Trinidad
This is just moving 01100110 digits as money has no value without surety.
- William, Hay~Heath UK
House prices on the rise - isn't this one of the reasons the country is in such a mess? Time for house values to drop by another third, yes people will suffer but they are the same people who would happily have taken any profits, and does anyone really care if a few estate agents go bust?
Next target the credit card companies and hit them where it hurts
- Paul, Ealing
I am the only person who is seriously tired of constant comparisons to earlier slumps? Depening on who you listen too, this recession is 'the worst since the 80's/ the 70's/the Second World War/The Great Depression' etc etc ad nauseum. Of course it means nothing to most people, and massive changes in standards of living make these comparisons totally redundant anway. Can it stop now please?
- Alan, London
The country is not in a recession. It is just adjusting to a level it should have been all along. We were all living in a fool's gold world of borrowed money to pay off borrowings to pay off more borrowings. The true value of everything was lost in a sea of "must have NOW. " In twenty year's time, when we have recovered our common sense, we will look back and thank our lucky stars that we have found a better, less demanding way of life based on construction and not destruction.
- Albert Hall, hove england
Had the Government given the people, the billions of tax payer’s money they gave to the Banks; we would all be rich today and spending it like hell.
Instead we have to carry on borrowing our money from the banks as usual, only they don't want us to actually borrow the money they need for their own bonuses etc.
These are high class benefit cheats, and immune from prosecution, the only benefit cheats that get prosecuted; are the lower classes living on the bread line.
- Mickinlondon, london.
"Recession ‘will be the worst since Second World War’"
This comment seems strangely at odds with the news that house prices are on the rise again, and inflation is now firmoy under control The recession is coming to an end nor getting worse
- Keith Price, Luton, England
