Britain's economy set for a lost decade

A recent report has forecast depressingly slow growth for Britain's economy over the coming years. But the horrifying truth is that it could get much worse.

Get set for "more cuts, more pain, more borrowing", said The Independent. Chancellor George Osborne's autumn statement was unrelentingly bleak. He had hoped to eliminate the structural budget deficit by 2014/2015, as projected in the March budget. But he will now need a further two years of austerity to reach his target. Public-sector job losses are expected to reach 710,000, up from an initial forecast of 400,000. Britain will have to borrow £111bn, or 7% of GDP, more than expected over the next five years, and public debt is set to peak at 78% of GDP, not 70.5%.

This reflects much weaker growth over the next few years. The Office for Budget Responsibility (OBR) almost halved its growth forecast for this year to 0.9% and cut its estimate for 2012 from 2.5% to 0.7%. All told, the economy will be 3.5% smaller in 2016 than the OBR previously thought, and not much bigger than in 2007.

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