UK faces zero growth for next five years - Arbuthnot

The UK is heading for zero average GDP growth over the next five years, according to the chief strategist at Arbuthnot Securities.

James Ferguson said UK banks are only halfway through the deleveraging process, which can take five to six years, so economic growth in the country will be around zero for the next five years.

"I do not think people appreciate how low growth will be. Public and private sectors cannot both run a surplus and if the public sector runs less of a deficit, GDP growth must contract," he said.

His comments come just days after Capital Economics revised long-term gilt yield forecasts in response to the "deteriorating prospects for the UK economy". The firm said it expects 10-year yields to drop to 2% by the end of this year from a prior forecast of 2.5% and a current level of 2.4%.

The Office for National Statistics estimated UK output for the second quarter was 0.2%.

Arbuthnot's Ferguson said although the £200bn pumped into the markets through quantitative easing helped avoid a deflationary recession, the UK economy has almost nothing to show for it, in terms of GDP growth, apart from an increase in the budget deficit.

"However the economy was and is dependent on it," he added. "You only have to look at Ireland to see what would have happened without it."

The UK money supply would have contracted 13% without QE and, now, QE2 looks "increasingly necessary", Ferguson said.