Deloitte predicts slow economic recovery

THE economy will grow by 1.5 per cent this year and by only one per cent next year, according to a report published today by Deloitte, which also warns the risk of a double dip recession has not disappeared.

Roger Bootle, economic adviser at Deloitte, says in the latest issue of its Economic Review that companies that provide goods and services to the public sector are likely to be hit hardest by a reduction in government spending following the Comprehensive Spending Review.

He adds retailers are also likely to suffer heavily as household income is squeezed by a combination of tax rises, the public sector pay freeze and job cuts.

Deloitte says corporate balance sheets are less stretched than household and public sector budgets while the recent rise in business investment is encouraging.

But Bootle adds: “It seems unlikely that the corporate sector will be able to offset the weakness in the rest of the economy, especially when a weak global recovery is set to prevent exports from taking full advantage of their increased competitiveness. The economic recovery is set to remain sluggish at best.”