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UK faces “decade of pain“

A leading economic forecaster has warned that the UK faces a decade of pain after a massive debt binge.

In a report out today the Ernst & Young ITEM Club, which bases its forecasts on official Treasury models, predicts that growth will struggle to reach 1% in a “challenging year”.

Chief economic adviser Peter Spencer said: “We are no longer in a position to borrow - the massive debts that we racked up in the last decade now need to be repaid.”

Official figures due later this month should confirm a pull out of recession in the final three months of 2009 but ITEM put this down to emergency measures such as the ‘cash-for-bangers’ scrappage scheme.

“Once the effects of these temporary stimuli have worn off, it is difficult to see where the growth is going to come from in the short-term,” Mr Spencer added.

ITEM said the country had to boost exports over the long-term to avoid the risk of economic stagnation. The report contrasts with claims made in recent weeks that the UK is on its way out of the worst of the recession.

“It is vital the UK rejuvenates its overseas investment model and starts selling into countries such as China, where we have an exceptionally low market share compared to our leading competitors.”

ITEM added that it “remained concerned” over the UK’s dire public finances, with net borrowing set to soar to a record £178 billion this year due to the impact of recession.

Mr Spencer said: “Unless the wider recovery turns out to be significantly stronger than we anticipate some further increases in unemployment are still likely in the coming months - prolonging consumer caution.

“The UK’s only hope of significant growth is a rebound in overseas exports and income - as well as inward investment.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .