Gloomy forecast for UK's economy

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George Osborne could have avoided a double-dip recession if he had delayed implementing austerity measures, a think-tank claims // George Osborne could have avoided a double-dip recession if he had delayed implementing austerity measures, a think-tank claims
George Osborne could have avoided a double-dip recession if he had delayed implementing austerity measures, a think-tank claims
Britain's GDP will shrink by 0.5% in 2012, a leading economic think-tank has forecast in one of the gloomiest assessments yet of the state of the economy.
The prediction by the National Institute of Economic and Social Research (Niesr) was down sharply from its zero growth forecast in May, issued before the publication of official figures showing the economy contracted by 0.7% in the second quarter of 2012 alone.
Niesr also downgraded its forecast for UK growth in 2013 from 2% to 1.3% and said that the "Jubilee effect" reduced growth this spring by 0.4%.
The deterioration in the UK's economy this year has been "more pronounced than even we expected", said the thinktank, which also said Chancellor George Osborne has "scope for a less aggressive path of fiscal tightening" and should consider stepping up investment in key projects to boost growth.
The report also found that the Government's decision to implement austerity immediately after it came to power may have cost the country a total of 16.5% in GDP growth over a decade - the equivalent of £239 billion in 2010 prices.
If the Chancellor had waited to introduce his deficit-reduction package of cuts and tax rises until 2014, by which time the recovery that began in 2010 would have been "well under way", he could have avoided this year's double-dip recession, said Niesr's experts.
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