Dark clouds? Britain's economic recovery under threat

Wednesday, 11 August 2010 3:50 PM

By politics.co.uk staff

Confidence about Britain's economic recovery has been dented, with the Bank of England lowering its growth forecast and raising expectations of inflation.

The Bank's growth forecast for 2011 was revised downwards from around 3.4% to around 2.5%, while it blamed the VAT hike to 20% for increased expectations for inflation.

King lowers growth forecast

The reports follows the publication of data suggesting consumer morale is falling steadily as the public prepare for cuts to public spending, and seperate evidence that youth unemployment is still rising in much of the country.

Consumer morale drops

Youth unemployment 'still rising'

Taken as a whole, the data contributes to the evidence base of those who suggest Britain will experience a double-dip recession. If shown to be accurate, it would lend considerable credence to Labour arguments that the Tories are cutting public spending too quickly and deeply.

Labour remained on the back foot today, however, with Tory party chairman Sayeeda Warsi demanding Labour leadership contenders forgo their ministerial severance pay to make up for their "mismanagement" of the economy.

Coalition demands Labour hopefuls forego severance pay

But Office for National Statistics (ONS) data also out today showed a modest improvement in the labour market.

Unemployment falls - for now

Employment figures fell by 0.2% in the three months to June 2010 to 7.8%.

But analysts warn that the jobless benefit figure does not represent the full picture, however, and that long-term unemployment and underemployment continue to be a significant concern.

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• economic policy
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• economy
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• economy and finance