Ernst & Young cuts UK growth outlook

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Ernst & Young has warned that the UK economy has stalled at a “dangerous junction” and downgraded the country’s growth prospects.

The group’s Item Club now expects UK GDP to grow by just 0.9% over the course of 2011, significantly down on the 1.4% it forecast three months ago. It also cut its 2012 prediction from 2.2% to 1.5%.

This month, figures from the Office for National Statistics showed the economy grew by 0.1% in the second quarter of the year. The department previously estimated growth to be 0.2% over the three months.

Peter Spencer, chief economic adviser to the Ernst & Young Item Club, says: “It’s worse than we thought.

“The bright spots in our forecast three months ago - business investment and exports - have dimmed to a flicker as uncertainty around Greece and the stability of the eurozone increases.”

Furthermore, the forecaster says the Bank of England’s £75 billion addition to it quantitative easing programme is unlikely to stimulate growth and instead recommends the central bank considers cutting interest rates to a new record low of 0.25%.

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