British Slump Forecast to Go Into Next Year

The recession in Britain is expected to last “well into next year” as the economy continues to suffer from slow business and low consumer confidence, according to a new economic forecast.

In its economic outlook for 1992-1996, the London Business School for Economic Forecasting said any effect on the economy of recent interest rate cuts and the British pound’s decline will be lost because of recent shifts in British economic policy.

Prime Minister John Major last week signaled a change in the government’s economic direction, moving toward growth and job creation. Major said he would increase capital spending on infrastructure, allow interest rate cuts and accept inflation of 2% to 3%.

The forecast said Britain’s manufacturing output won’t halt its slide for another six months, while a rise of only 0.9% is forecast for next year.

“Such a weak recovery will limit the inflationary impact of a lower pound and, helped by lower mortgage interest rates, retail price inflation” will remain almost unchanged over the next year, the business school report said.