UK economy to contract in first half of 2012

Date: 3rd February 2012

Small businesses operating in a wide range of sectors are set to see the economy enter recession in the first half of 2012, according to a new report.

The latest forecast published by the National Institute of Economic and Social Research (NIESR) showed that the economy is to contract by 0.1 per cent in 2012.

However, the long-term prospects are slightly brighter, with the organisation predicting growth of 2.3 per cent in 2013 if the eurozone crisis can be resolved.

"We forecast a return to technical recession in the first half of this year, as households continue to retrench, credit conditions remain tight, and businesses are reluctant to invest given uncertainty about both domestic and foreign demand," the organisation said in its UK and World Economy Forecast.

In order to make the next six months or so more comfortable for businesses and consumers alike, the NIESR has called on the government to promote growth by temporarily easing its spending cuts regime.

Posted by Thomas Fletcher