UK economy 'waiting on world trade'

The UK’s economic recovery will not gain momentum until other markets around the world begin to stabilise, a new report has stated.

According to the Ernst & Young ITEM Club’s autumn forecast, British GDP will struggle to reach growth of one per cent next year as the economy continues to emerge gradually from the recession.

The report indicates that 2010 will be another difficult year, with the restoration of VAT to 17.5 per cent on January 1st expected to curb consumer spending.

However, it also identifies growing optimism among consumers and businesses, with equity markets at their highest level for a year and the property sector showing signs of an upturn.

’We have come a long way since this time last year. Let’s not forget how bad things were,’ said Professor Peter Spencer, the Ernst & Young ITEM Club’s chief economist.

However, he added: ’For a sustainable recovery, the UK economy needs world trade to pick up and there is still not much sign of that happening.’

Commenting on the report, Vicky Redwood of Capital Economics said that it reflects the widely-held view that the UK’s recovery from the recession will be ’pretty sluggish’.
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