The UK will enter recession the European Commission has said.
It cut its growth forecast for Europe to just 1.4 per cent and predicted UK, Germany and Spain will enter a period of negative growth later this year.
Joaquín Almunia, economic and monetary affairs commissioner said: “The continuation of the turmoil in the financial markets one year on, the near doubling of energy prices over the same period and the correction in some housing markets have had an impact on the economy.”
He advised moving ahead with Europe’s reform agenda to help better create jobs and survive external shocks.
“We must speed up the implementation of the road map to help restore confidence in the financial markets, and preserve the improvements in public finances so as not to increase the burden for future generations, which will already face the challenge of an ageing population.”
The Commission has observed output starting to fall in several advanced economies.
Despite the gloomy economic forecast it said a projected easing of inflation could support householders’ disposable incomes in the fourth quarter and turn the economy round.
German fund managers have recently bought into commercial property in London hoping prices have bottomed.