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Economists cast doubt on early recovery from slump
Joe Murphy, Political Editor02.01.09
SENIOR economists warned today that Alistair Darling's hopes of an early recovery may be optimistic.
Instead of a revival starting in the second half of the year, as forecast by the Treasury, most think Britain will remain in a slump for an extra year.
House prices will continue to slide throughout 2009, they said, and unemployment is likely to hit three million before the recession ends.
The bleak predictions are in a survey of 67 economists by the Financial Times. It found concerns that conditions were the worst since the early Eighties and the Government lacked a credible policy to restore the public finances to health.
There was more bad news today as credit rating firm Experian predicted 1,600 retailers, mainly small firms, were in danger of failing this year.
If correct, the forecasts suggest Gordon Brown will go into the next general election with the economy still in a trough. Mr Brown used his New Year message to admit that the year ahead "won't be easy" and to appeal to the public to show wartime spirit.
Among experts questioned in the survey was Sir Howard Davies, director of the London School of Economics. He said: "I do not expect to see any significant economic recovery in 2009. I expect the British economy to bump along the bottom, at best."
Alan Budd, former chief economic adviser to the Treasury, warned of a significant risk that "industrial and commercial firms ... will be forced to sack people and cut investment drastically in an attempt to restore liquidity". Oliver Marc Hartwich, of The Centre for Independent Studies, added: "The recession will be deeper and longer than forecast in the pre-Budget report. I would not expect the recovery to begin before 2010." Seven of the analysts polled were formerly on the Bank of England's monetary policy committee.
The majority of the 67 said it was vital to step up efforts to limit the damage to jobs and the misery of recession. But some warned the Government's decision to stimulate spending by cutting VAT and letting borrowing soar would backfire.
Charles Goodhart, former chief economist of the Bank of England, said: "By 2012 we will be wishing that we had done it differently ... fiscal profligacy will soon come to be rued."
Reader views (11)
Why is it so hard to change our government compared to changing other countries' governments?
- James, Leicester
Its not a credit problem its DEBT.. its finally come.
This is not a recession.. its not a depression. its worst. get ready for a new chapter in your life
- Paul, Manchester
Presumably these are the same economists that failed to see the crunch until after it had happened ?
- Cap, london
If we have to suffer a depression to get rid of this disgusting, useless Government so be it.
- William, London
"The bleak predictions are in a survey of 67 economists by the Financial Times." - Is that really worth printing? Economists and analysts have proven time and time again that they are as useful as a wet paper bag. Let's prove everyone wrong and get Britain up and running again by showing a bit of resourcefulness and spirit...
- Rossy, Chislehurst, Kent
Mr Brown used his New Year message to admit that the year ahead "won't be easy" and to appeal to the public to show wartime spirit.
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"Ah Yes"!!!.............."Patroitism, the last refuge of the scoundrel"!
Dr.S.Johnson.
Sounds about right to me!
- Geronimo, LONDON MIDDLESEX
Surely Brits should have the opportunity to get a more savvy government than Crash Gordon's "dream team".
- Jacqueline, Hampstead, London
At last a groundswell of opininion is gathering doubting the policies adopted by our wretched Prime Minister and his shambolic Government to restore the public finances to health. Surely the electorate can not be fooled any more and should take the opportunity offered by the General Election when it comes, to leave no doubt that the Country does not want to see their like again.
- Ian Glen., Durham.
It is the usual viscious circle,if I do not pay you,you cannot pay your bills,so on and so forth.
The problem is that the far east and near east,these countries have taken away work from Europe and the U.S.A
that will never return.
- David Nigel Braham, Milan Italy
This Alister and his "boss" Crash Gordon are a disgrace and will cost us more than anybody they should go, but they are un-elected bureaucrats so bad news..
- Georgie, Islington, London
Sounds as if the Archbishop knows more about economics than the PM or the chancellor. What a surprise that the economists now agree with him.!
- Norcot, Oakham uk
