The Office for Budget Responsibility (OBR) has announced that the UK economy will contract by 0.1 per cent this year, a significant change from predictions announced in March's Budget.

The Budget outlined that the economy was expected to grow by 0.8 per cent this year but the OBR has stated that, weak productivity “will constrain nominal earnings growth for longer” and the overlook for UK exports has also deteriorated. Further, difficulties in the euro area will “depress confidence and put upward pressure on bank funding costs”.

Delivering the Autumn Statement today, Chancellor George Osborne confirmed that the economy will grow by 2% in 2014, 2.3% in 2015, 2.7% in 2016 and 2.8% in 2017. However real GDP would be 3.2% lower in 2016 than forecast in March.

Nevertheless, Osborne stated that “Britain is on the right track and turning back would be a disaster”. He added: “The economy is healing. Investment is flowing into UK gilts instead of flying from them and we have to keep it that way. We are seen as one of the safe havens.”

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