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Focus: Safe on solid ground?
It's official: the UK has finally clawed its way out of recession - but only just, and it is the last major global economy to do so.
"The uncertain political backdrop is likely to have increased household and business caution," he adds. "However, unemployment may not prove to be as great a challenge as anticipated. Greater wage flexibility, and a more rapid interest rate response to the peak in house prices that occurred in the early 1990's, could contribute to a better employment outlook than many have forecast."
But with Mr Darling last month committing to halve Britain’s £178bn budget deficit within four years, accountants Smith & Williamson predicts a VAT increase to 20 per cent, a further 0.5p in the pound on National Insurance, and a 1 and 3 percentage point increase in basic and higher-rate tax bands, respectively. A £50,000 salary could carry a tax liability of £18,673 in 2011-12, its research showed.
"From a macro viewpoint, [the figures] will make it more difficult for the government to address the pressing issue of the large deficit, with the amount of debt on its books relative to GDP at a record high for peace time," Mr Scott says.
"The GDP figures highlight the urgency of a cogent and workable plan that will reduce our public borrowings, while at the same time restoring the economy to an accelerating growth path. If this is not done, the UK's sovereign debt could come under the spotlight," he warns.
