Economic growth 'to slow this year'

Britain's economic growth will slow this year as the impact of the global credit squeeze, rising consumer debt and inflationary pressures take hold, according to experts at Alliance Trust.

The investment company's research centre has predicted that the economy will slow to between one per cent and 1.5 per cent growth in 2008.

Earlier this week, Gordon Brown, the prime minister, claimed Britain had broken the back of inflation. However, energy and food prices are rising and there have been murmurs about the downward trend in the cost of electrical goods coming to an end.

The Alliance Trust Research Centre believes these inflationary pressures, along with the credit crunch, the fiscal deficit, a slowing housing market and rising private debt levels, will hamstring the economy in the coming months.

"With this difficult combination of pressures facing us in 2008, we expect weaker levels of consumer confidence and spending to slow economic growth to 1-1.5 per cent next year, around half this year's level," said Shona Dobbie, head of the research centre.

This is likely to be bad news for homeowners as they will see the value of their properties stagnate or even decline.

At the same time, inflationary pressures could put off another rate cut, which would make home loans more affordable.


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