Economy set for 'modest growth'

The UK economy will return to modest growth next year, with developments in the euro zone posing the biggest risk, a leading think-tank said this morning.

The National Institute for Economic and Social Research (NIESR) predicts that GDP will dip this year by 0.1%, up from its August forecast of a 0.5% contraction, after strong expansion in the third quarter.

However, NIESR revised down its 2013 growth forecast to 1.1% from 1.3%, due to a weaker global outlook.

"Risks to the UK economy are dominated by the external environment," it was reported as saying. "Developments in the euro area are most important, both because of trade and financial sector linkages."

NIESR economist Simon Kirby told the press that the think-tank did not expect more quantitative easing asset purchases from the Bank of England over the next few years, adding that Britain's monetary policy was likely to remain accommodative until 2020.