UK in recession says Item Club economic forecasters

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Media caption,

Andrew Goodwin, senior economic advisor for the Item Club: "Confidence is heavily damaged"

The UK may have already slipped back into recession, economic forecaster the Item Club has warned.

The think tank said gross domestic product shrank in the final quarter of last year and would contract again in the current three-month period.

It said that even if the eurozone could resolve its problems the UK economy would grow by just 0.2% this year.

It also predicted unemployment would rise by a further 300,000 to just below three million people.


"We are probably in technical recession," the Item Club's chief economic adviser, Peter Spencer, told the BBC.

"Consumption was very badly hit by rising inflation last year, business spending has been paralysed, and of course recruitment has also gone on hold as a result of the euro crisis.

"And unfortunately, turning to exports, Europe takes the lion's share of our exports."

The Item Club said the economy would not return to normal levels of growth until 2014 as the eurozone crisis continued to hold back investment in the UK.

Even if a solution was found, Britain's economy would still only grow by 1.75% in 2013 and 2.8% in 2014, it said.

'Restaurant vacancies'

The forecaster called on UK exports to find new markets for their products and stop relying on European economies.

Meanwhile, the Chartered Institute of Personnel and Development said unemployment would stay above 2.5 million until at least 2016, peaking at 2.9 million next year.

Chief economic adviser John Philpott said the jobless rate would rise to 8.8% at the end of next year.

But some employers said they had vacancies they could not fill, including Brasserie Blanc owner Mark Derry.

"We are finding it very difficult to find people at the moment which is quite unusual," he said.

"Apparently there's approaching a million under 25-year-olds unemployed and yet when we open restaurants... in the end we are ending up going sometimes overseas to find people."

Great expectations

Mr Derry said the company advertised extensively through job centres and elsewhere.

"The expectation has been set quite high in this country, often through a generation of kids doing degrees, some of which are not specific," he said.

"I think they're finding it very hard to apply for jobs like ours."

Another forecast from the Centre for Economics and Business Research said the UK would actually shrink this year by 0.4% and by a full 1% if the eurozone broke up.

The next official Office for National Statistics figures for growth will be published next week.

TUC general secretary Brendan Barber said unemployment figures out this week were likely to be grim and urged the government to make jobs its "top priority".

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