ROOF Blog

Fears of a double-dip recession and a sterling crisis in the run-up to the election were raised last night amid news of collapsing investment in British industry and a warning from one of the world’s leading financiers that the pound could plummet within weeks. The pound fell sharply on the foreign exchange markets after a day of grim economic news which saw an admission from RBS that it had missed government targets for business lending, a downgrading of the UK growth prospects by the European commission and a warning from the CBI that consumer spending was likely to remain weak ahead of polling day.

Deloitte, Britain’s second-biggest professional services group, is to seize a foothold in the £2 billion commercial property consulting market by acquiring one of Britain’s oldest real estate firms. The ‘big four’ accountant will merge its real estate practice with Drivers Jonas, the UK’s eighth-biggest commercial property adviser. The new unit will have revenue of £110 million and 700 staff, but John Connolly, Deloitte’s chief executive, who forged the deal, said that fee income is expected to more than double to £250 million within three years. Mr Connolly said that Deloitte identified Drivers Jonas as the most attractive target in the commercial property market because of its size, profitability and reputation.

Construction activity fell in December for the 22nd month in a row as a surge in housing was offset by a sharp decline in commercial building. The construction purchasing managers’ index, where any level below 50 signals a drop in business activity, rose slightly to 47.1 from 47 last month. ‘December was another disappointing month for the UK construction sector. Unlike other parts of the economy, it seems unable to escape the shackles of the recession,’ said David Noble, chief executive of the Chartered Institute for Purchasing and Supply. ‘Purchasing managers painted a bleak picture as firms suffered from reduced client demand and falls in new business.’

The immediate prospects for Britain’s economy are grimmer than in any previous forecast and output is unlikely to revert to pre-crisis levels before 2011, the Bank of England said in a stern warning yesterday.

Presenting the Bank’s quarterly Inflation Report, the Governor, Mervyn King, was at pains to stress that, while the economy might soon return to modest growth, that was not necessarily a cause for ‘bunting and celebration’.

The fall in GDP of about six per cent had been severe and the ‘prolonged period of balance-sheet adjustment’ now beginning would hold back growth, Mr King said, adding that output was ‘unlikely, at least for a considerable period, to return to a level consistent with a continuation of its pre-crisis trend’.

The economy, he said, had ‘only just started on the road to recovery’ and the Bank believed that inflation was ‘on balance more likely to be below the target than above it for most of the forecast period, though by the end the risks are broadly balanced’.