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Britain was today told it faces a deeper recession than previously thought as it was singled out as the one major economy whose prospects have deteriorated over the summer.
The Organisation for Economic Co-operation and Development (OECD) said the UK economy would shrink by 4.7% this year - worse than the 4.3% decline it forecast in June.
It was in stark contrast to the improved prospects the Paris-based group sees for other major economies which were given upgrades.
The OECD also warned that recovery in the UK will lag behind much of the rest of the developed world. Official figures show that France, Germany and Japan have already emerged from recession and the eurozone is on the verge of doing so.
The downgrade was an embarrassment for the Government on the eve of this weekend's G20 meeting of finance ministers in London.
It also overshadowed a bullish survey which showed the UK's dominant service sector grew at its fastest pace for nearly two years last month.
The Chartered Institute of Purchasing and Supply said its measure of activity in the sector, where above 50 marks growth, rose from 53.2 in July to 54.1 in August driven by expansion in finance and hospitality.
Treasury minister Stephen Timms said the Government stood by its Budget forecasts of a 3.5% slump in output in 2009. "Our view is that we will return to growth around the turn of the year," he said.
The OECD again predicted the US economy will shrink by 2.8% this year but upgraded Germany, France, Italy, Canada and Japan as well as the 16-nation eurozone and the G7 as a whole.
Chief economist Jorgen Elmeskov said the global recession is coming to an end faster than thought just a few months ago, but warned headwinds such as high unemployment and falling house prices meant the recovery was "likely to be modest for some time to come".
The OECD forecast the UK economy to shrink by 1% in the third quarter - weaker than the US, Japan, Germany, France and the eurozone. It predicted stagnation in the fourth quarter of the year compared with growth in the other G7 economies except for Japan which the OECD expects to slide back into recession.
Reader views (8)
Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 04/09/2009 10:18
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The higher one is the harder the fall....and the whole British economy was built on very high and daring speculation with no solid foundations !
- Edouard, Toulouse. France, 04/09/2009 05:03
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we wont get moving until we have a national government with Vince Cable as chancellor. If anyone can sort this mess out, he can. He is far more astute and qualified for the job than Osborne or the present incumbent.
- Jed, United Kingdom, 03/09/2009 20:07
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Clearly we need an election. This government have completely lost the trust of the people, business and the rest of the major world economic powerhouses.
We need a refreshed and new government - one which will lead and not hide behind their mistakes and mistaken idiotic values. Rebuild the relationship Labour have wrecked with the US, sort out the massive waste of money we are funding into Europe, bring in sensible immigration controls, sort out the unbelieveable waste in top heavy local and central government and get the finances back in a proper state.
- Tim, Marlborough, 03/09/2009 18:18
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Labour have always left a huge economic headache for the incoming Conservative government. This time however, Brown has managed to put all those previous Labour administration’s calamities in the shade - and then some. With the massive expansion of government spending, employing up to a million additional public service workers, paying millions to become benefit layabouts and having to deal with hundreds of thousands of destitute immigrants - the difference between what the government spend and what they receive in income this year amounts to a colossal £175 billion. Someone will have to lend us this or the whole, laughingly called economy, collapses and Britain has to default on all it’s debts - but it gets worse, because next year, we’ll have to go out and borrow even more! No wonder we’re the basket-case amongst the advanced countries of the world and Brown will have left a scorched earth Britain with no obvious means of earning enough foreign exchange to re-pay these enormous sums. The future for the young in this country is bleak, as they’ll be paying crippling taxes for decades just to pay back the interest on those loans.
- William Boreham, Kingston upon Thames., 03/09/2009 18:15
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So we're not best placed to weather the storm??? But Gordon said we were, surely that competent Mr Brown wouldn't be lying would he?? He's prudent dontchaknow.
- M, London, 03/09/2009 16:57
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But our recovery will be stronger, longer-lasting and more secure, because we have a more flexible economy than continental Europeans do. Our economy is more volatile but more dynamic and we will soon outstrip the French and Germans once again.
- Neil, London, London UK, 03/09/2009 16:57
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okay - can we just cauterize the wound and move on. I don't think the Tories will do any better - but us stagnating politically isn't helping.
- Jc, se1, 03/09/2009 16:43
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