UK recession hinges on Euro survival - Osborne

UK recession hinges on Euro survival - Osborne

By Rob Crossley

November 29th 2011 at 1:44PM

Treasury 'undertaking extensive contingency planning'; Credit easing scheme detailed

The UK will not walk itself into a second recession, the Chancellor George Osborne said today in his Autumn statement.

But in a grave warning in the House of Commons he said Britain would find it difficult to escape a double-dip unless the Eurozone crisis is averted.

The Office for Budget Responsibility has revised its GDP growth down to 0.9 per cent for this year and 0.7 per cent the next.

Osborne attempted to ease fears of a new recession, as many have predicted, by stating that Britain is faring well within its own means.

He said the poorer growth forecasts were partly due to a “chronic lack of confidence to reduce debts” across the Eurozone.

“We are undertaking extensive contingency planning for the Eurozone crisis,” he told the House.

Yet Britain has kept interest rates low, in fact the lowest in Europe, he said. He added that Britain is the only European nation to have its credit rating improve.

And a range of new measures were introduced to stimulate business. The credit easing scheme – a kind of government guarantee that secures banks to loan to small businesses – will be fuelled by £40 billion.

Another measure announced was the £1 billion business-finance partnership aimed at Britain's mid-sized companies.

To help pay for this the Chancellor announced a public sector pay cap of 1 per cent. This will commence following the current two-year pay freeze.

Yet the Government’s ambitious budget deficit reduction targets – which essentially were to balance the books by 2015 – have been revised down.

Debt will peak at 78 per cent of GDP in FY14/15, Osborne said.

GROWTH FORECASTS

0.9% in 2011
0.7% in 2012
2.1% in 2013
2.7% in 2014
3.0% in 2015

BORROWING FORECASTS

£127bn in 2011/12
£120bn in 2012/13
£100bn in 2013/14
£79bn in 2014/15
£53bn in 2015/16