Gloomy forecast for 2010 economy

Ernst & Young ITEM Club forecast claims UK economic prospect is 'dismal' this year

Cloudy forecast: The UK economy will 'struggle' to hit one per cent growth in 2010

The latest ITEM Club report from accountancy firm Ernst & Young has painted a gloomy picture of 2010 being another hard slog for the UK economy with little chance of growth.

ITEM Club is the only research method to use the HM Treasury model of the UK economy, and predicts a GDP growth of 2.7 per cent next year and 3.4 per cent in 2012, based on an increase in exports followed by investment.

Despite the report claiming world output and trade are now recovering rapidly, it says: "This is really a story for UK growth in 2011 and subsequent years, not for this year."

World trade will not regain its 2008 peak until the end of 2011, it claims.

"The immediate prospects for the UK economy remain dismal and the ITEM Club still thinks that the economy will struggle to achieve one per cent growth this year," the report said.

On a more positive note it said many firms weathered the ravages of the credit crunch and the recession "remarkably well".

It warned of a continuing weak home market as consumers and government try to pay down debt, but said the weakness of sterling provides many firms with profitable investment opportunities.

"UK Plc needs to take bold steps to finance overseas expansion as well as new export capacity in order to grow the business," it said. "Companies with cash but without such growth opportunities should consider returning this to shareholders."

To see the whole report, click here.