Economy to shrink in 2012

The Office of Budget Responsibility, which makes economic forecasts for the government, revised its 2012 prediction down to a 0.1% contraction compared to forecast growth of 0.1% in the March Budget.

George Osborne said: “The economy has performed less strongly than predicted.” But he added: “We are on the road to recovery.”

The revised GDP predictions now stand at: -0.1% in 2012, 1.2% in 2013, 2% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017.

However the Chancellor said the International Monetary Fund put the UK economy’s recovery ahead of its neighbours France and Germany.

Ed Balls, Shadow Chancellor, described the statement as an “economic failure”.