The UK economy is set to experience its weakest period of growth in 15 years and there is a risk of a recession in the next two years, a report warns.
The UK economy is set to experience its weakest period of growth in 15 years and there is a risk of a recession in the next two years, a report warns.
The Deloitte Economic Review said that the housing market would be at the heart of the downturn, with prices falling by about 5% this year.
The Deloitte Economic Review said that the housing market would be at the heart of the downturn, with prices falling by about 5% this year.
The global credit squeeze would make borrowing more difficult, it added.
The global credit squeeze would make borrowing more difficult, it added.
A prolonged economic downturn may also force employers to "wield the axe more sharply", the report said.
A prolonged economic downturn may also force employers to "wield the axe more sharply", the report said.
"The global financial crisis and the associated credit crunch have brought an end to the period of easy credit that in recent years has been the bedrock of rapid rises in house prices," said Roger Bootle, Deloitte's economic adviser.
"The global financial crisis and the associated credit crunch have brought an end to the period of easy credit that in recent years has been the bedrock of rapid rises in house prices," said Roger Bootle, Deloitte's economic adviser.
He expects house prices to fall by 8% in 2009.
He expects house prices to fall by 8% in 2009.
Bail-out?
Bail-out?
Unlike in 2005, Deloitte said the UK economy would not be bailed out by a strong world economy.
Unlike in 2005, Deloitte said the UK economy would not be bailed out by a strong world economy.
It expects US growth to slow to zero in the first half of this year.
It expects US growth to slow to zero in the first half of this year.
And while the European economy, the UK's biggest export market, will remain relatively strong, it will not be enough to offset a US slowdown, the report says.
And while the European economy, the UK's biggest export market, will remain relatively strong, it will not be enough to offset a US slowdown, the report says.
Nor will the rapidly growing economies of India and China come to the UK's rescue, as the two countries buy less than 5% of UK exports.
Nor will the rapidly growing economies of India and China come to the UK's rescue, as the two countries buy less than 5% of UK exports.
Inflation benign
Inflation benign
Relatively benign inflation should help to prevent a recession as it will give monetary policymakers enough scope to cut interest rates, the report says.
Relatively benign inflation should help to prevent a recession as it will give monetary policymakers enough scope to cut interest rates, the report says.
Deloitte forecasts that the UK base rate will fall to 4% in 2009 from 5.5% now.
Deloitte forecasts that the UK base rate will fall to 4% in 2009 from 5.5% now.
A technical definition of a recession is two successive quarters when the economy shrinks.
A technical definition of a recession is two successive quarters when the economy shrinks.
Deloitte expects the UK economy to grow by 2% this year and by a slightly smaller margin in 2009.
Deloitte expects the UK economy to grow by 2% this year and by a slightly smaller margin in 2009.
The UK economy grew by 3.1% in 2007, its fastest rate in three years, but growth slowed in the last three months as the credit squeeze took hold.
The UK economy grew by 3.1% in 2007, its fastest rate in three years, but growth slowed in the last three months as the credit squeeze took hold.
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