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Brits set to slash spending, predicts think tank

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Date: Friday 02 May 2008

LONDON (ShareCast) - Consumer spending is set to dry up this year as tighter credit conditions and falling house prices force people to hang up their shopping bags, a leading research institute has warned.

The National Institute of Economic and Social Research reckons the UK economy will slow sharply from last year’s 3% to just 1.8% in 2008, the slowest pace since 1992.

"The UK economy has perhaps reached its most precarious position in over a decade because of global financial market developments," said NIESR.

It thinks private consumption will “slow to a crawl” this year and next, with growth in consumer spending experiencing a slump from 3% in 2007 to 1.2% then to 0.6% in 2009.

“The UK has been reasonably adept at weathering previous global storms. However, the unfolding news on the current shocks to the economy suggests that they will be more difficult to offset than others seen since 1997,” the report says.

Last month, employers' lobby group the CBI cut its forecast for UK economic growth by 0.2% to 1.8% for this year and to 1.7% in 2009.

That compares with chancellor Alistair Darling's estimate for 2008 growth of between 1.75% and 2.25% followed by 2.25% and 2.75% in 2009.