Britain is set to face two more years in slump

 
Tim Wallace
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THE ECONOMY is flat-lining and will not return to pre-recession levels of output until 2014, according to a forecast out yesterday from the National Institute for Economic and Social Research (NIESR).

It estimated that the economy grew 0.1 per cent in the three months to May, reversing the 0.1 per cent decline in the three months to April.

That suggests the recession is over, and the economy is expanding very slowly, but shows growth hovering around the zero mark – the “zig zag” of a weak and volatile economy predicted by the Bank of England in February.

However, NIESR only recorded growth in the services sector – its output index rose from 99.1 to 99.2 in the three months, using 2008 as the base year 100.

Meanwhile the industrial sector dropped from 90.2 to 90 per cent of its 2008 level, agricultural production slipped from 78.8 to 78.7 per cent, and construction from 92.5 to 91.2 per cent of its pre-recession level.

“The UK economy has ceased to contract, but economic activity remains very weak,” said the think tank.

“We expect the UK economy to remain broadly ‘flat’ over the next six months. While significant downside risks persist, we expect economic recovery to begin to take hold in 2013.”

However, output remains more than four per cent below its pre-recession peak in 2008, meaning the economy is still in a depression.

The institute does not expect economic output to rise above that 2008 peak for another two years, even though the current prolonged depression has already lasted longer than any other major slump of the last century.