London, January 18: A group that bases its forecasts on official Treasury models warns that the UK faces the prospect of a decade of economic pain after a massive debt binge.
According to the Independent Treasury Economic Model (ITEM) Club economic forecasting group of auditors Ernst and Young, the British economy, expected to have escaped recession in the last quarter of 2009, faces a “challenging” 2010.
“The UK economy has moved out of a decade of debt and into a decade of painful readjustment,” the report said.
The report says that the British economy will stagnate if the government relies on consumer spending for growth and that the country has to boost exports over the long-term to avoid the risk of economic stagnation.
“After years of relying on domestic spending and borrowing, the economy now needs to rebalance towards saving and exporting, or risk stagnating,” it added.
The ITEM report predicts that the UK growth will struggle to reach 1% in a “challenging year” and that its recovery will rely on trading more with Asian tigers like China.
“It is vital the UK rejuvenates its overseas investment model and starts selling into countries such as China, where we have an exceptionally low market share compared to our leading competitors,” the report said.
——-Agencies