If the think-tank is right, there will be plenty more opportunities to pick up some sale bargains in 2012
12:14am UK, Tuesday December 27, 2011
Britain’s economy is facing a “bleak” new year, with a real risk of returning to recession during 2012, a think tank is warning.
The only good news for consumers is an expected fall in inflation, which will ease the squeeze on spending power in those households which remain in work, says the centre-left Institute for Public Policy Research.
With no solution yet found for the eurozone crisis and many European economies already back in recession, the risk is that a mood of austerity will stunt the UK’s growth too, the institute’s chief economist Tony Dolphin says in a New Year message.
Going into 2012, the risk is that talk of austerity at home and crisis in Europe will dampen spirits to such an extent that the economy drifts into recession.
Tony Dolphin, IPPR
“As we enter 2012, it seems the word that best describes the outlook for the UK economy is ‘bleak’,” said Mr Dolphin.
“The eurozone crisis is unresolved and country after country is being forced to adopt extreme austerity measures that will result in large falls in output.
As a result, the whole eurozone economy is believed to be back in a mild recession.
“Going into 2012, the risk is that talk of austerity at home and crisis in Europe will dampen spirits to such an extent that the economy drifts into recession.”
The IPPR believes more should be done to boost the economy
In the case of a double-dip recession, a return to growth will be possible only with a boost in public spending, a substantial increase in demand for British goods and services from overseas, or if UK consumers and businesses are given a reason to spend more, he adds.
“The first is not going to happen, the second is extremely unlikely, and so we are left with the third,” he said. “But with no prospect of tax cuts or lower interest rates, it is not clear what, in the short term, the catalyst for more spending by the private sector will be.”
The IPPR is calling on the Government to do more to boost the economy, including bringing forward the establishment of a National Investment bank to have it up and running by the end of 2012.