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%.