Recovery could take five years, warns think tank

The UK could take as long as five years for income per head to return to the level it was at before the downturn, a leading think tank has warned.

The National Institute of Economic and Social Research (NIESR) believes that total UK GDP will fall 4.3% in 2009, before rising 1% in 2010 and then 1.8% in 2011.

This prediction shows a similar trend to its earlier forecasts, but with a much slower rate of recovery.

The group has also indicated that public borrowing is likely to exceed £120bn during the next four years.

Income per head, or GDP per capita, will take until March 2014 to return to the level it was in the first quarter of 2008, when the recession first hit the nation, the organisation warned.

NIESR said a more credible plan to return the public finances to a path of fiscal sustainability “remains a necessity”.

Using the assumption that the government intends to maintain the tax plans set out in the Budget, NIESR forecasts that public borrowing will hit £165.7bn in 2009 - 12% of GDP.

Should the government insist on its aggressive curtailing of public sector spending, this figure would still remain at £121.6bn for 2013 and 2014.

The think tank suggested heavy spending cuts alongside a rise in taxes across the following years would be implemented to mitigate the debt.