30th July 2012
According to a report by The Sunday Times, many economists fear that Britain could enter a "triple dip" recession in 2013 as the sovereign debt crisis in the Eurozone overshadows a brief recovery generated by this summer's Olympic Games.
This "unprecedented " event would be triggered in spring next year by an exit of Greece from the euro region, threatening Britain's AAA credit rating, the article said.
Azad Zangana, one of the economists included in the report, contends that while he expects the UK economy to return to growth in the third quarter – thanks to the additional boost from the London Olympic Games – the bleak picture would return in 2013 – thus extending the current double-dip recession into a possible ‘triple dip' recession scenario.
Mr. Zangana, a European Economist at Schroders asset management, said: "We continue to forecast the economy to return to positive growth in the second half of the year, though we also forecast a return to recession in 2013, partly caused by the eurozone debt crisis, but also partly caused by a lack of effective policy left available to the Bank of England."
Similarly, Michael Saunders at Citigroup thinks GDP will grow only 0.3% in 2013 – down from his previous forecast of 0.5% – with the risk of a triple dip.
"My guess is that for the next few quarters, after a technical bounce in the third quarter, the economy will be roughly flat, which I would describe as a disastrously bad outcome compared with previous cycles," Saunders said.
Meanwhile, in view of the dire predictions, the British Chambers of Commerce (BCC) and economists at the Ernst & Young Item Club have urged the Bank of England to take immediate action to slash the cost of borrowing to homeowners and business. Indeed, some commentators believe a cut to 0.25 per cent could be agreed this week.
And as the Daily Mail notes, "Action on this scale would knock almost £500 a year off a typical £150,000 tracker mortgage – putting money directly into the hands of cash-strapped families. It could also help businesses struggling to pay their debts.
"But it would be bad news for savers, pensioners and those approaching retirement, who are already suffering the effects of years of low interest rates."
David Kern, chief economist at the BCC, said a rate cut would be more effective in boosting demand and easing inflation than another round of the quantitative easing recently favoured by the Bank.
"A rate cut now could really help business,' he said. ‘Lower inflation is critical to underpinning real incomes and sustaining demand in the UK economy."
George Osborne, the Chancellor of the Exchequer was also urged reconsider the U.K.'s austerity strategy. In an article for The Sun newspaper, Ed Balls, Labour's Shadow Chancellor, wrote: "If last week's figures won't make the government wake up and change course, then I don't know what will."
"But the longer they stick to this failing plan, the heavier the price our country will pay."
The recession has effected many people in many different ways and with the potential of a 'tripple-dip' occurring, more and more people will be looking for advice on an IVA whilst paying back their debts. IVA stands for "Individual Voluntary Arrangement" and is way for debtors to avoid bankruptcy, by agreeing to pay back a set amount they can afford, on a regular basis, over a period of time. Have a look at debtfreedirect.co.uk for more of an insight of how it works.
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