Bank of England gives downbeat economic forecast

The Bank of England has predicted that the economy will remain flat, with very little gross domestic product (GDP) growth and a continued threat from the eurozone.

In its latest Quarterly Inflation Report, the Bank suggested the economy is likely to see the "erratic factors" deepening the recession "continuing through the remainder of this year".

Nor is the picture beyond 2012 expected to be bright either. The Monetary Policy Committee stated: "There remains a range of views among committee members
about the outlook for GDP growth.

"On the above assumptions, the Committee's best collective judgement is that the economy will gradually recover, but that GDP growth in the second half of the forecast period is more likely to be below than above its historical average rate."

Such an outlook may bring more gloom for those struggling with debt. It would suggest there is less chance than might be hoped of increasing wealth and growing wages to make paying off such bills easier, while job losses may result as firms run out of cash reserves and consumers continue to lack confidence to spend.

Unemployment is a frequent cause of debt as consumers can move suddenly from being able to meet their repayments from their income to suddenly losing the means to make these.

People hit by such events should seek help as soon as possible, in order to maximise their options.

One brighter spot in the report was that inflation is set to carry on falling, reducing the strain on consumer incomes as it dips to the two per cent Consumer Prices Index target this year.

The Bank warned that failures by eurozone countries to tackle the problems with the single currency's debt crisis adequately may make the situation in the UK substantially worse. The UK's exports sector would be the most obvious sufferer, but more problems in Europe could further depress general business and consumer confidence.

A Confederation of British Industry survey showed the impact eurozone weakness has been having, with the three months to July indicated small manufacturers saw domestic orders rising by two per cent, but exports down four per cent.

By Joe White