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Ernst & Young ITEM club concerned about UK economy

The Ernst & Young ITEM club has this weekend issued a rather downbeat statement on the UK economy with a suggestion that UK base rates could remain at 0.5% until 2014. Members of this exclusive club believe that the UK economy will find it difficult to absorb large budget cuts and tax increases in the short to medium term and indeed the Bank of England may well be forced to reintroduce its quantitative easing program.

While there's no doubt that budget cuts and tax increases will play their parts in the future performance of the UK economy the idea that UK base rates could remain at 0.5% for the next four years is not something which many people have considered. Apart from the fact this would indicate that the UK economy was struggling to survive, the impact upon savers over a prolonged period would be enormous. This would then create further pressure for those moving towards retirement, unable to live off the interest from the savings thereby putting more emphasis on the UK benefits system.

Whether this is something of a doomsday scenario remains to be seen but the fact that such a prominent economic club is even thinking this is a major concern.

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