UK economy could experience 'lost decade', economist warns

The UK economy could dip down again at the start of 2010 after enjoying a brief bounce later this year, a leading economist has warned.

Speaking ahead of the publication of the latest economic forecasts from the Bank of England, Sushil Wadhwani has warned that the prospects for the domestic economy could be worse than are currently perceived.

The economist, a former member of the Bank’s monetary policy committee (MPC), said that the economy could slip into a Japanese-style ’lost decade’ on the back of the ’double dip’, with any immediate upturn likely to be merely temporary.

’The second half of 2010 could be more difficult for the UK than 2009,’ Mr Wadhwani told the Daily Telegraph.

’There will be a big fiscal tightening, the VAT tax cut will have gone, and the world as a whole will be slowing at that point. You will have several things coming together which will dampen the economy.’

Earlier this month, the Bank of England opted to continue with its policy of quantitative easing, injecting a further £50 billion into the UK economy.
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