The economy in 2008: chilly showers but no hailstorms

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.