Credit crunch to bite UK economy
The UK economy will face slowing growth because of credit crunch but there will be no property crash, according to a group of economic analysts.
Predictions from the Ernst & Young Item Club point to growth in 2008 falling 0.4 per cent to 2.1 per cent.
The Item Club's Autumn Forecast claims the credit crunch is "an opportunity to rebalance the economy, which has become overly dependent on lax credit and monetary conditions".
Despite falling growth, serious house price falls are not expected.
While, in the wider economy, greater falls are not expected from the tightening of lending on the international markets - the so-called credit crunch - due to the UK's economic stability and strength.
"The threat of a major credit crunch seems to be receding at a speed which few people would have anticipated a month or so ago," said Professor Peter Spencer, chief economic advisor to the Item Club.
"Yet, the longer-term consequences are difficult to predict. One thing is certain, this is a very timely tightening, targeting parts of the financial sector that were growing too fast and were too dependent on cheap credit.
"Having to reverse gear may not be such a bad thing."
Professor Spencer added it was "unlikely that there will be a major housing recession", given the falls in mortgage rates and the strong labour market.
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