The latest forecast from the influential Ernst & Young ITEM Club suggests that the UK has avoided a double-dip recession.
These forecasts use the same models as HM Treasury, making them particularly important in advance of official GDP figures from the Office for National Statistics.
In forecasting ‘dismal’ growth of 0.4% this year, Ernst & Young says the economy will improve in 2013, posting growth of 1.5% next year.
They believe that policy measures have been sufficient to boost business confidence and avoid a return to recession in the first quarter.
These latest forecasts paint a more pessimistic picture of the outlook for the UK economy compared to the last set of predictions from the Office for Budget Responsibility (OBR).
At the time of the Budget in March, the OBR forecast growth of 0.8% in 2012 and 2% in 2013.
Economic growth is important for the UK as this is a key strand of the government plan to shrink the size of the national debt. Despite monetary policy helping to avoid a return to recession, these moves are limited in their scope.
This latest set of forecasts suggest that businesses are faring well, stockpiling cash and awaiting investment opportunities. In contrast, households across Britain are facing pressures caused by the austerity measures and sustained high price inflation.
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