City expert warns of 'double-dip' recession

Date: 28th January 2010

The expected removal of government fiscal stimuli after the forthcoming general election means that a double-dip recession remains a "strong reality", according to one City analyst.

Mark Bolsom, head of the UK Trading Desk at foreign exchange specialist Travelex, said the possibility should not be rejected as the narrow growth recorded for the last quarter was reliant on an "unprecedented level" of government support.

"Because of our huge deficit, we expect a real tightening of fiscal policy after the general election," he explained.

"The situation stands to get far worse when stimulus is withdrawn - we can see already that retail sales are already slumping now VAT has returned to its former level."

VAT was increased to its original rate of 17.5 per cent on January 1st after the government introduced a temporary 15 per cent rate to boost consumer sales during the economic downturn.

Despite Mr Bolsom's warning, sterling rose to a five-month high against the euro earlier today (January 28th).