Sluggish UK growth may create £3bn hole
A continued slowdown in UK growth in 2002 could result in £3bhn hole in public finances, accountancy consolidator Tenon has warned.
Latest figures show gross domestic product grew by 0.2% in the three months to December 31 2001, down from 0.5% the previous quarter and lower than the 0.6% growth recorded in the fourth quarter of 2000.
For the year as a whole, the economy grew about 2.4%, down from 3.0% in 2000 but within chancellor Gordon Brown’s predicted range of between 2.25% and 2.75%.
Maurice Fitzpatrick, head of economy at Tenon said: ‘If growth slips to 1.5% in 2002 as a whole, that will blow a £3bn hole in public finances, which is unhelpful at a time when the government is looking to raise taxes to finance the public sector.’
He estimated that if economic growth remained at 0.2% in the first quarter of 2002, GDP would have to increase by 0.9% for the rest of the year to achieve the lower end of the chancellor’s 2002 estimate. ‘It’s a pretty tall order and quite a sharp rebound.’
‘We’re in a slowdown, the quarterly growth has been slowing but it hasn’t been declining,’ he added.
Fitzpatrick concluded that while he did not expect Brown’s targets to be achieved, he did not expect the UK economy to go into recession.