Double-dip recession in Britain unlikely, says poll

BRITAIN’S economic recovery will slow in the second half of the year, but the chances of a double-dip recession remain slim as the central bank keeps rates at a record low, a Reuters poll forecast.

The survey of around 50 economists, taken over the past week, predicted the British economy will grow 0.5% in the third quarter and then between 0.3-0.5% per quarter from there until the end of 2011, little changed from July’s poll.

The country surprised markets with growth of 1.1% in the second quarter, but economists say planned government spending cuts, weak demand from major trading partners and banks’ continuing reluctance to lend will slow the recovery.

“Growth was unexpectedly strong in the second quarter, but we expect the rate of expansion to slow in the second half of the year and remain relatively subdued in 2011 as the fiscal squeeze begins in earnest,” said John Hawksworth, head of macroeconomics at PwC.

The poll predicted the economy would grow 1.4% this year, slightly better than thought last month, and 1.9% in 2011 – slightly worse than in July’s poll. Forecasts for 2011 ranged from 0.9 to 2.7% growth.

The Bank of England is expected to cut its own growth forecasts for growth and bump up its inflation predictions when it publishes its quarterly Inflation Report today.

The Bank said in its May report the British economy would see annual growth of 3.4% by 2012 and inflation would slow to below 2% in two years, even if interest rates stay at record lows.

Consumer price inflation was 3.2% in June, well above the BoE’s 2% target, but most policymakers view the factors that pushed it up – sterling weakness, higher sales tax and higher oil prices – as temporary.