THE UK is well on its way to suffering a Japanese-style lost half-decade of flat or worse economic growth, according to research released yesterday.
Though the service sector is back above its pre-recession high in output, catastrophic industrial and construction output mean the economy as a whole is roughly in the same place as it was four years ago, just after the sharpest dip in the recession, Moody’s Analytics said.
And this gloomy picture could go on for yet another year, it forecasts, given fiscal consolidation and monetary intervention that seems to be petering out.
Though the authors say the onus is on the Bank of England to bolster the economy, they point out that the traditional policy level – the Bank rate – has been stuck at an all-time low for almost four years. And the more unconventional policies they have tried have been “called into question”, the consultancy says.
And this will not be helped, according to the authors, by a shift in consumer habits away from spending and toward saving.
All this together means there will be another year of weakness before a true return to a “robust pace” of growth, the authors say.
The fourth quarter of 2012 will show “at best minimal growth” they say. And unemployment – so far a nugget of optimism amidst a gloomy economic picture – will turn around to peak at 8.4 per cent towards the middle of 2013.
Neither the construction market nor the closely-linked housing market will improve in 2013 either, the authors predict, with UK house prices taking potentially until 2020 to get back to their pre-recession highs.