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24 November 2008 Pre Budget Statement - Darling downgrades economic forecasts as UK grapples with recession

The Chancellor of the Exchequer has downgraded his economic growth forecasts for 2008/09, acknowledging that the economy will shrink as the UK heads for a recession.

Delivering his eagerly-awaited Pre-Budget Report to an animated House of Commons, Alistair Darling predicted that UK economic output will slow to 0.75% in 2008 and fall to between -0.75% and -1.25% in the first two quarters of next year.

The cut, which is the biggest downward revision on record, came in the wake of ‘recent global economic shocks’ which, the Chancellor confirmed, are rooted in the American sub-prime housing crisis.

However, Darling claimed the economy will ‘recover’ in the second half of 2009, asserting that the UK was ‘well positioned’ to benefit from its resurgence. Consequently, he predicted economic growth would increase to between 1.5% and 2% in 2010.

Emphasising the ‘exceptional’ and ‘challenging’ global economic circumstances, the Chancellor also announced that the Government will inject an extra £20bn into the country’s ailing economy - 1% of GDP.

The cash boost will be funded, in part, by a substantial increase in Government borrowing. Borrowing would reach £78bn this year and climb to £118bn next year, the Chancellor confirmed.