Outlook for 2012 is bleak say experts

Britain’s economy is facing a “bleak” new year, with a real risk of return to recession, a thinktank has warned.

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, said the 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 centre-left think-tank’s chief economist Tony Dolphin warned in a New Year message.

“As we enter 2012, it seems the word that best describes the outlook for the UK economy is ‘bleak’,” said Mr Dolphin.

“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 the [UK] economy drifts into recession.”

In the case of a “double-dip” recession, a return to growth would be possible only with a boost in public spending, a substantial increase in demand from overseas or if UK consumers and businesses were given a reason to spend more, he added.