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The UK has a seven-in-ten chance of slipping back into recession unless European leaders can find a resolution to the debt crisis, a new report argues.
Even if a solution is reached quickly, the chance is as much as 50%, the National Institute for Economic and Social Research said.
Eurozone leaders are due to meet at a G20 summit later on Thursday with fresh uncertainty hanging over the three-pronged rescue deal reached last week, which was designed to ease the region's debt burden.
Greece's finance minister and prime minister appear to be at odds over the bailout package. Meanwhile, China said it will not invest in the European Financial Stability Fund (EFSF) - a key part of the rescue solution - until the situation with Greece has been clarified.
The NIESR report suggest that, whatever the outcome of the G20 meeting, the UK could return to recession by the end of next year.
"There is a weakness in demand from both consumers and investors, but the main downside risk is from the eurozone crisis," said the body's director, Jonathan Portes.
He called on the government to rethink its policy of tough spending cuts in light of weak demand.
"The impact of the government's tough fiscal policy has been negative. Going forwards, they should loosen policy moderately to help growth," he said.
Figures released this week showed the economy grew by 0.5% between July and September.
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I am sick and tired of voting based on a manefesto presented before the elections followed by a swift u-turn knowing that they are secure for the next 5 years, shorter terms should be introduced. I believe this will move changes along quicker and promises kept knowing they will face the wrath of the public alot sooner. Vote here if you agree. http://epetitions.direct.gov.u... We hold elections every 2 years so politicians who get in power on false promises can be removed quicker. I would like to see elections held every 2-3 years so that people who tell lies/ go back on their manefesto promises can be held to account a lot sooner , i.e you can have a referendum on Europe / sorry we changed our mind now we seen that gravy train and it looks to tasty to give up.
Posted by: 2yearelections
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U.K. in recession soon?? Why?
I really do not understand why some commentators like Mr. Portes seem to think that a Greek withdrawal and the effect on the Franco/German axis which controls Europe would mean the U.K. slipping back into recession and armageddon for the rest of the world. Since July the German DAX has lost 21% of its value, the French CAC, 23%, but the UK L.S.E only 13%. Seems to me that the quicker Europe gets out from under the Franco/German control freaks, the better for all of us. And now we have film stars turning up at Cannes to ask for more money to be given to countries like Somalia. Does Somalia not make enough out of its piracy activities?
Posted by: Don