January 2013 is not a good time to spread gloom but a number of major players in investment and banking are quite downbeat about the possibility of an earlyUK economic recovery.
According to the investment bank Citi, interest rates will stay at rock bottom for another four years as the economy struggles to recover. Citi predicts that the Bank of England will leave interest rates at 0.5 per cent until mid-2017 - a year longer than expected - as it battles to restore the economy to health.
Warnings come as Britain's fragile economy lurched towards a possible unprecedented triple-dip recession in a major setback for the Chancellor, George Osborne. Reports suggest the economy shrank by 0.2 per cent between October and December, leavingBritainon the brink of a third recession in just five years.
In a further blow to the Chancellor, UKborrowing costs climbed above those in Francefor the first time in nearly two years amid mounting fears over Britain's debts and AAA credit rating.
Britain remains trapped in the longest downturn for a century and Mr Osborne has stated that he believes it will take far longer than hoped to eliminate the previous government's record deficit and get the national debt under control. While the prospect of eight years of ultra-low rates will be welcomed by borrowers, this will inflict yet more misery on savers who have seen their nest-eggs eroded by paltry returns and high inflation.
Citi cut its 2013 growth forecast from 0.8 per cent to 0.4 per cent and said output will rise by only between 0.5 per cent and 1 per cent in 2014 - far weaker than expected by the Treasury. The bleak Citi prediction came as figures from the research group, Markit, suggested the economy slammed into reverse at the end of last year after the briefest of recoveries over the autumn.
The so-called Purchasing Managers' Index of Activity in the services sector, a closely watched barometer of economic strength where any score below 50 indicates decline, fell from 50.2 in November to 48.9 in December. It was the first time the index has been below 50 since December 2010, when business was hit by unusually heavy snowfall. This indication has been interpreted by several observers as signalling that the risk of another bout ofUKeconomic recession is too close to call.