UK economy ‘flatlining’

The UK economy will experience zero per cent growth in 2012, according to the Bank of England’s quarterly inflation report.  The announcement followed on from a 0.7 per cent decline between April and June.

Economic activity, Governor Sir Mervyn King predicted, would not return to pre-recession levels until 2014.  Interest rates are expected to stay at 0.5 per cent over the rest of the year.  “Many of the conditions necessary for a recovery are in place,” he said, reiterating that this would be a long, slow process.  The Olympics, in his view, indicated “the importance of total commitment when trying to achieve a goal that may lie some years ahead.”

Quantitative easing by the bank will reach £375 billion by the end of this year, after a further £50 billion injection which started over the summer.

The stark forecast came as the Coalition Government approached its half-term mark, due in November.  Chancellor George Osborne pledged “110 per cent” attention, effort and energy to get the economy moving.  In July, he and the Bank of England jointly announced the Funding for Lending scheme, which allows banks and building societies to increase lending at lower rates.

When asked to comment on the forecast, a Department of Finance and Personnel spokeswoman said that the Executive “can and is taking steps to restore confidence by creating the conditions necessary for the growth of our economy.”  She pointed to the Economic Strategy and its focus on export-led growth, rates reductions, and ongoing investments in skills and infrastructure.  “With manufacturing industry output up,” she added, “the Executive is taking trade missions to improve exports to those growing parts of the world, such as India, China, and South America.”