UK could relapse into recession, faces bleak 2012: think tank

The outlook for UK economy is bleak for 2012  with risks of the economy tumbling back into recession thanks to confidence-crushing austerity measures and the crisis in the eurozone, says a new report.

According to the think tank, Institute for Public Policy Research (IPPR), the only good news for consumers was that inflation would fall and so the squeeze on household spending power would end - "at least for those who keep their jobs".

Tony Dolphin, chief economist at the IPPR said, during 2011, growth was lower than expected, unemployment higher and public sector borrowing greater. Looking ahead he saw no obvious way to shore up the economy.

He added, in the short term, economic policy had become a matter of hoping that something turned up and that was the reason, 2012 would unlikely be a happy new year for the  the UK economy.

Dolphin said as the world entered 2012, it seemed the word that best described the outlook for the UK economy was 'bleak'. He added the eurozone crisis was unresolved and country after country was being forced to adopt extreme austerity measures that would result in large falls in output.

Highlighting the assessments of the Organisation for Economic Co-operation and Development and the UK's Office for Budget Responsibility (OBR) he said the UK economy was teetering on the brink of a relapse into recession.