Allister Heath forecasts that Britain’s economy will suffer less than America’s, but that homeowners and consumers will still feel the pain — and blame it on Gordon Brown
First, the good news: there will be no recession next year in Britain. But while avoiding ‘the Big R’ will be some cause for celebration, the overall outlook for 2008 remains bleak. The economy will not shrink but it won’t grow by much either. And there will be plenty of pain to go round. House prices will fall noticeably, which means that most members of the property-owning majority will become poorer — the first drop in wealth levels in more than a decade. The fallout from the demise of the great housing boom and the effects of the global credit crunch will be felt across the economy, with defaults and repossessions rising sharply, loans becoming more expensive and harder to obtain and thousands of buy-to-let investors hitting the buffers.
City bonuses will remain (relatively) depressed; retail sales growth will grind to a halt and consumers will tighten their belts and save more. Commercial property will stay in the doldrums, with capital values dropping and yields increasing. Immigration levels will decline as it becomes harder to find work here; but highly motivated migrants will still find it easier to get jobs than many native Britons: the number on out-of-work benefits will rise from the current level of around 5.3 million.
Perhaps most important of all, 2008 will be the year voters finally understand that Gordon Brown’s ‘economic boom’ was largely a myth. In the good years, it was easy to convince the electorate that Britain’s prosperity was unique; in fact, while London’s growth has been impressive, that of the UK as whole has lagged behind every major English-speaking country since 1997.
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