The private sector will not be able to protect the UK economy from the impact of 500,000 public sector job losses, according to BestInvest chief investment officer Graham Frost.
Speaking at the Aito Conference, Frost said that although chancellor George Osborne’s detailed austerity measures have placed the UK in a strong position in international markets, the country faces a number of obstacles on the road to full recovery.
“The private sector is stepping up but I don’t think it is going to really do well enough to replace the 500,000 jobs that will be lost,” Frost said.
He said that the predicted job losses would require the government to keep interest rates low, adding: “Interest rates are pretty much zero in Europe, UK, the States and Japan.
“They’re going to normalise at some point in time, they won’t stay at zero for the rest of our lives.”
He added the growth of the UK economy next year is unlikely to exceed this year’s levels.
Frost also predicted the UK’s banks will take up to seven years to recapitalise and added the dollar may start to weaken in the next three to four years.
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