Economy to expand less than expected, Bank says

Julian Harris
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GROWTH forecasts by the Bank of England are now even weaker than in February, worsening the headache for its monetary policy committee and endangering chancellor George Osborne’s deficit reduction plan.

“The Bank’s forecasts are moving towards our less optimistic projections,” said Simon Kirby of the National Institute for Economic and Social Research (NIESR). Chancellor Osborne will need even greater tax hikes or spending cuts if he wishes to eliminate the deficit by the end of Parliament, Kirby expects.

Even excluding the effect of the heavy snow in December, the economy has been virtually stagnant for the last six months, the Bank thinks.

Yet some doubt appeared to be cast over recent Office for National Statistics GDP figures. “Business surveys and the growth in employment over recent months suggest that underlying activity may have been stronger than indicated by official output data,” the Bank said.