Page last updated at 05:40 GMT, Monday, 19 April 2010 06:40 UK

UK economy to 'languish in doldrums', forecaster warns

Bank of England
The economy is one of the key battlegrounds in the general election

The UK economy will remain stuck in the doldrums this year with growth of 1% or less predicted in 2010, a leading forecaster has warned.

The Ernst & Young ITEM Club, which uses the Treasury's economic model for its forecasts, said the immediate prospects for the UK were "dismal".

An export-led recovery was unlikely to emerge until 2011 and consumer spending was too weak for a recovery, it said.

It comes in a key week for economic news as the election battle gains pace.

Public finance figures on Thursday will confirm how much the government borrowed in the financial year that has just ended.

And on Friday first quarter figures for overall economic output will be published.

'Eagerly watched'

ITEM said consumer spending was suffering as UK households laboured under high debts, subdued wage growth and lingering risks of unemployment.

The latest inflation and unemployment data will be watched eagerly by politicians and economists to see whether the recent downward trend is sustained in both cases
Hugh Pym, BBC chief economics correspondent

But despite the warning, ITEM's chief economic adviser, Peter Spencer, said there were "good reasons to be optimistic" about overseas demand - such as the weak pound - although global trade was unlikely to regain its 2008 peak until the end of 2011.

He said: "The lack of domestic growth opportunities will force exporters and other organisations to seek overseas income streams, particularly in Asia, while the weak pound makes UK output extremely competitive.

"The longer this situation continues, the more obvious it will become that this is the way forward, both for businesses and the macro-economy."

BBC chief economics correspondent Hugh Pym said the economic figures released this week would "add impetus" to the election campaign debate about the state of the economy.

"The latest inflation and unemployment data will be watched eagerly by politicians and economists to see whether the recent downward trend is sustained in both cases," he said.

The key question would be whether the economy grew at the same pace as in the fourth quarter of last year, when it emerged from recession, he said.

The UK economy emerged from recession after six consecutive quarters of contraction.

Official figures show the economy grew by 0.4% in the last three months of 2009, up from the original estimate of 0.1%.



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Mail Online UK Interest rate pressure grows as inflation surges higher than forecast - 2 hrs ago
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Sky News UK Economy Faces 'Dismal' 2010 - 29 hrs ago
The ScotsmanScottish Business Briefing - Monday 19 April, 2010 - 31 hrs ago
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