Report: UK Misses Recession But Jobs Slump
The UK has narrowly managed to avoid a double-dip recession, but households will continue to struggle, according to a forecast by the Ernst & Young ITEM club.
The influential group of economists expect the UK economy to grow by just 0.4% this year, half the 0.8% estimated by the Office for Budget Responsibility, the Government's offficial spending watchdog.
The ITEM club then forecast GDP growth to rise to 1.5% in 2013 and 2.6% in 2014.
It said that emergency measures from the Bank of England, European Central Bank and US Federal Reserve have helped restore confidence and stabilise the markets.
But it also warned that in order to give the economy a boost, businesses need to stop hoarding cash and start investing.
The cash balances of private non-financial companies are worth more than £754bn, the equivalent of 50% of GDP, but business investment last year only increased by 1.2%.
The UK economy shrank by 0.3% in the final three months of last year and is broadly expected to have just avoided a technical recession by growing at around 0.1% to 0.2% in the first quarter of 2012.
Peter Spencer, chief economic adviser to the Ernst & Young ITEM Club, said: "Business investment has picked up nicely in the US but UK companies remain extremely risk averse, which is sapping strength from the economy."
But in contrast to big business, households remain under intense pressure.
Unemployment is expected to approach 9.3% of the UK's total workforce by the middle of next year, with just short of three million people out of work, before beginning to fall back, the ITEM Club said.
Another survey has showed that the average number of applicants for every job has increased from 15 to 20 over the past year, rising to over 50 for some vacancies.
Employment website totaljobs.com said areas such as Scotland and Wales had been hit by a "huge fall" in the number of vacancies available, down by 17% and 18% respectively.
The area with the biggest competition for jobs was the North East, with 23 applications for every job posted on the site in recent months.
But Mr Spencer insisted things will get better and said: "There is a small glimmer of light at the end of the dole queue.
"For the first time in years, the gap between wage growth and inflation should start to close, before reversing in 2013."
Meanwhile, business advisors BDO's latest business trends survey said that a leap in output expectations signalled a significant move towards economic growth.
BDO's Output Index, which points to business conditions one quarter ahead, has risen above the crucial 95.0 mark that indicates growth for the first time since summer 2011, indicating positive economic growth for mid-2012.