An economics group has suggested that the slow pace of recovery in the UK may have nudged up the chances of the country slipping into a new recession.
According to the Centre for Economics and Business Research (CEBR), growth for 2011 is set to slide back to 1.1 per cent, down from official forecasts of 2.1 per cent.
As a result, the possibility of a double-dip recession has increased to one in five.
The CEBR said: “The chances of a double dip for the UK economy have risen from 10 per cent in October to 20 per cent now.
“The VAT rise, which was planned before the harvest failures that have boosted food and cotton prices – affecting the price of clothing – will help keep inflation up in 2011 while adding to the squeeze in disposable income and reducing GDP growth.”
Douglas McWilliams, CEBR chief executive, commented: “It is a tough background for achieving the reductions in public spending that are absolutely necessary to reduce the deficit.”