OECD predicts UK recession

Britain's economy will slip into recession in the second half of 2008, the Organisation for Economic Cooperation and Development (OECD) has predicted.

The Paris-based body's latest assessment of economic prospects among the G7 countries predicted negative growth of 0.3 per cent in the third quarter of the year and negative growth of 0.4 per cent in the final quarter.

It follows neutral growth in the three months to June this year and growth of 1.1 per cent before that. As a result the OECD has slashed its overall projection for 2008 growth from 1.8 per cent to 1.2 per cent.

"Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth," the OECD said.

"OECD short-term forecasting models point to weak activity through the end of the year."

It blames the downturn in housing markets, continuing "turmoil" on the financial markets and "tight" oil supply conditions are all cited as contributory factors.

Despite the bleak outlook the OECD says there is no need to make drastic policy changes.

"Underlying inflation has been rising steadily in the euro area for some time, suggesting that capacity pressures need to be reduced," it adds.

"Hence, at this moment, there is little need to change existing policy stances. Should a need to tighten or loosen the macro policy stance become apparent, monetary policy would be the preferred instrument."