Recession 'will hit this year'

03/09/08 17:34

The economy will fall into recession before the end of the year, a European think tank has warned, putting even more pressure on businesses.

Paris-based think tank the Organisation for Economic Cooperation and Development (OECD) said the economy will shrink at an annual rate of 0.3% during the third quarter, and 0.4% between October and December.

The report said the economy will grow by just 1.2% this year – less than half the official 2.5% figure forecast by the Treasury, and a sharp fall from its earlier prediction of 1.8%.

Experts said the worst affected sector would be export businesses, as economies across the eurozone grind to a halt. Countries in the eurozone take around half of the UK’s exports.

Liberal Democrat treasury spokesperson Lord Matthew Oakeshott said the UK is less likely to recover quickly than other economies because of falling house prices.
“While the OECD is claiming Britain is in recession, the prime minister admits he doesn’t even know where the money for his misguided £600m stamp duty suspension will come from,” he said.

The news is the latest in a series of blows to the government, just days after chancellor Alistair Darling told The Guardian the economy is at its ‘worst in 60 years’. The comment saw the pound plunge to its lowest level against the dollar since April 2006.

The announcement also came a day after Gordon Brown announced ‘the abolition’ of stamp duty on properties under £175,000, which received a lukewarm reception from experts.