A poll of top economists has warned that the British public should prepare to feel worse off in 2011,
despite overall economic growth.
The survey, carried out by global news agency Reuters, predicts that an inflationary surge in the
coming months is likely to be followed by the Bank of England raising interest rates.
Average wage rises below the rate of inflation are already making things tough for many Britons, and
predictions for 2011 have caused some to lose confidence in the central Bank’s ability to help keep
the cost of living under control.
Growth of the UK economy is likely to maintain its current slow pace, as the country struggles to
recover from its deepest economic recession since the 1940s. The government’s Office for Budget
Responsibility has predicted a 2.1 per cent growth in 2011, after only 1.8 per cent in 2010.
However, the Reuters poll considers even this forecast to be optimistic, instead predicting a 2011
growth of only 1.9 per cent.
Ross Walker, an economist with the Royal Bank of Scotland, has described the current state of the
economy as a “pain postponed” recession. Initially, the government and UK businesses bore the
brunt of the financial crisis, while the public saw only a limited rise in unemployment, and benefited
from interest rate cuts and a temporary VAT reduction.
In 2011 however, a VAT increase, inflation, and further unemployment resulting from public-sector
spending cuts could be accompanied by Bank of England rate hikes later in the year – pointing to
tougher times ahead for the UK public.
