THE UK economy will contract by 0.7 per cent this year, the OECD said yesterday, in a sharply revised prediction from that made in May, when it forecast UK growth of 0.5 per cent.
The OECD (Organisation of Economic Cooperation and Development) also cut growth forecasts for other major developed economies, saying that the eurozone debt crisis poses the greatest risk to world growth.
Its growth forecast for Germany, the economic powerhouse of the eurozone, was cut to 0.8 per cent from 1.2 per cent.
The OECD warned that recession was ‘taking hold’ in the 17-nation bloc, which it said is the biggest threat to any global recovery.
The response of the Bank of England was continued paralysis on rates and printing money (quantitative easing which it refers to as asset purchases).
The Bank said: ‘The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5 per cent.
‘The Committee also voted to continue with its programme of asset purchases totalling £375 billion, financed by the issuance of central bank reserves.’
Meanwhile, the effect of the recession on workers and youth was spelled out in the latest Office for National Statistics figures on ‘workless households’.
The ONS said: ‘In April to June 2012 there were 3.7 million UK households with at least one member aged 16 to 64 where no-one was currently working.
‘This represented 17.9 per cent of households.
‘In all, 1.8 million children lived in these households, as did 5.0 million people aged 16-64.’
The ONS added: ‘There was a rise of 246,000 in mixed households – those that contain some people in work and some who are not.
‘The number of mixed households stood at 5.97 million, or 29.1 per cent of the total.’
TUC General Secretary Brendan Barber said: ‘These figures make clear that high concentrations of workless households are not due to a so-called “benefits culture” but because of mass unemployment caused by the collapse of major industries.
‘It is a lack of jobs that puts people on benefits, not the other way round.
‘Ministers must avoid the easy option of demonising people on benefits. This attitude will not help a single person back into work.
‘Instead we need an industrial strategy and proper investment to create jobs and give hope to the UK’s marginalised communities.’
• The OECD report was published as the European Central Bank was holding a meeting at which it detailed new plans to buy up bonds of sinking eurozone members.
