United Kingdom

Current Economic Outlook

The UK economy will contract significantly in 2009. RGE still supports the GDP forecast of ‐4.4% for 2009 that we released at the end of Q2. The UK economy will grow in 2010, yet modestly. RGE expects 0.3% growth. Consumer demand and investment have remained lackluster throughout Q3 and will continue to weigh upon the economy through Q4 2009 and Q1 2010. Credit conditions for small to medium sized enterprises remain tight while unemployment will continue to rise. The use of fiscal stimulus, record low interest rates and the support of the financial sector appear to have lessened the effects of the downturn, yet public finances have deteriorated significantly, causing longer term concern. The need for fiscal consolidation remains and concerns over the UK’s public spending is widespread, with even the Bank of England expressing the need for a clear path to fiscal sustainability. As output begins to improve in the UK, it is essential for the government to formulate a fiscal and monetary exit strategy that is consistent with allowing the economy to grow.

Read RGE's Full Q4 United Kingdom Outlook.