UK back in recession and no rate rise until 2016 - CEBR

The UK is already back in recession and will not see any interest rate rises until at least 2016, according to economic thinktank the Centre for Economics and Business Research (CEBR).

The CEBR said it estimates the UK economy contracted in the last quarter of the 2011 and this negative trend has continued into Q1 this year, constituting a recession.

It has slashed its expectations of the UK's growth for 2012 from the 0.7% it forecast in October to a 0.4% fall, the Telegraph reports.

An even more painful contraction of 1.1% looms if the eurozone crisis worsens, the forecaster warned.

Separate forecasts from the Ernst and Young ITEM Club agreed the UK is likely already in a recession, blaming the "paralysed" recovery on political uncertainty in Europe.

Douglas McWilliams, chief executive of CEBR, said: "The world is going through a fundamental change where previously poor economies are industrialising fast.

"This is good news for them, but because of the limits imposed by shortages of energy, minerals and food, some of their growth is at our expense.

"This is not to say that if we break off trading with them we will be better off. On the contrary, a strategy of disengagement with the rest of the world would make matters very much worse."