Britain Expected to Backslide into Recession in Early 2012

Photo: Paul Ellis/AFP/Getty Images

(Telegraph) The Organisation for Economic Development and Cooperation (OECD) is predicting that the economy will shrink, the Government was warned on Thursday.

Whitehall sources said the forecasts suggest that growth would be negative during the first six months of next year due to the euro crisis.

The prediction, to be published on Monday, is the first from a respected forecaster to indicate that Britain faces a double-dip recession.

The preliminary findings of the OECD, to be released on the eve of George Osborne’s Autumn Statement, are said to have “sent a lightning bolt” through the Treasury and Downing Street. On Tuesday, the Chancellor will announce his growth strategy, which will lead to billions of pounds in infrastructure spending and a scheme to increase loans to small and medium-sized businesses.

However, officials at the OECD, which is backing the Coalition’s austerity drive, are believed to have advised the Treasury that it may have to draw up a so-called “Plan B” to slow public spending cuts if the single currency crisis is not resolved imminently.

The OECD forecast is understood to predict that the second recession will be very mild, before the economy begins to recover again in the summer.  Read More...