IMF sounds UK recession warning

The International Monetary Fund(IMF) has warned of an increased risk of recession from Q3 for the US and to a lesser extent the UK and France.

Its warning came as it cut estimates for UK growth in 2011 from 1.5% to 1.1%, while 2012's forecast was reduced from 2.3% to 1.6%.

The IMF also warned chancellor George Osborne's deficit reduction programme was threatened by weak growth rates.

It said in the event of any further downturn Osborne would have no alternative but to ease the pace of his deficit reduction plan.

"There is some evidence that drops in equity prices are associated with a greater chance of a new recession in a number of economies," the IMF said.

"There is an increased risk of a new recession from the third quarter of 2011 for the United States, and to a lesser extent for France and the United Kingdom."

US growth estimates were slashed from 2.5% to 1.5% for this year and 1.8% in 2012, down from a previous forecast of 2.7%.

The IMF said it also expects global growth to fall from 5% for 4% for the next two years.

"The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently and downside risks are growing," it said.

The IMF added urgent policy action needs to be taken by policymakers to address soaring debt levels.

"Strong policies are urgently needed to improve the outlook and to reduce the risks," it said.

"Only if governments move decisively on fiscal policy, financial repairs, and external rebalancing, can we hope for a stronger and more robust recovery."