Spending cuts outlined in the Budget have heightened the chance of a double-dip recession, officials from the Office of Budget Responsibility (OBR) have warned.
Geoffrey Dicks, a senior member of the OBR, told the new Treasury select committee the tough public spending cuts announced by the government would hurt growth.
He explained that between the OBR’s pre-Budget and post-Budget forecasts, the office had taken 0.5% off GDP and that, “the near-term outlook for GDP is not as good as it was before the Budget.”
Dicks said of the threat of a double-dip recession: “Logically, the chances of that happening have increased.”
John Philpott, chief economic adviser at the Chartered Institute of Personnel and Development, warned a double-dip recession would present big employee engagement problems for HR managers.
“The impact would be threefold,” he said. “It would mean reduced demand for staff in the private sector and increased redundancies; it would hit people who were kept on during the first recession and who have made sacrifices in terms of pay freezes and so on; and those people who were still left at the end of [fresh redundancies] would be more insecure and less willing to make sacrifices having trusted their employers initially.”
But Philpott added although things were going to be tough for a while, he believed a double-dip recession was a “possibility rather than a likelihood.”
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