Swine flu threatens green shoots

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By Carl Dinnen

Is swine flu about to kill off what green shoots of recovery there are? Carl Dinnen reports.

Swine flu could cause the recession-hit British economy to shrink by up to 7.5 per cent this year.

That is the warning today from the Ernst and Young ITEM club, a group which analyses treasury figures to produce forecasts.

Ernst and Young ITEM club's Peter Spencer joined us in the studio and gave his view on the extent to which swine flu would threaten the UK's economic recovery.

"The economic patient has been stabilized and that's a good thing but hopes for that recovery remain, I think, pretty weak.

"There's really no oomph in the high street. There's really no stimulus that you can see from the world economy. There's really nothing to pull us out of this recession quickly," he said.

On the news that shares have been rising, he added, "as the old adage goes the stock market has predicted something like four out of the last three recoveries. It really isn't a very good indicator."

Mr Spencer detailed how badly the recession-hit UK economy could be crippled further by swine flu.

"It could easily take another 3 per cent off output. That's first of all because people obviously find it difficult to go to work if they're poorly or their dependents are poorly.

"At the same time we are a little bit loathe to go into public places, that is going to hit airlines, hotels, catering - all of those kinds of industries.

"On a worse case scenario output could fall by 7.5 per cent but remember output is already down by 4.5 per cent, so it's really adding 3 per cent to that negative figure."

But Mr Spencer predicted economic recovery by the end of 2010: "It (swine flu) certainly won't accelerate the recovery but the good thing if you like about swine flu, if there is one, is that any output that is lost this winter will be made up pretty quickly as we come out of recession hopefully towards the end of next year.