The economic outlook for the UK is looking as bad as at any time since the dot-com crash of 2001.
A survey of 55 leading economists by the Financial Times reveals low confidence in the state of the economy and fears that there is little public authorities can do to improve the situation.
Almost two-thirds of those questioned by the paper believe house prices will fall this year. Nine out of ten said that public finances are in poor shape, so there is limited room for the government to use tax cuts or public spending to reduce the impact of a downturn.
When the 55 economists were asked about the housing market, 21 predicted "modest or sustained price falls (up to ten per cent)", ten expected bigger price falls and 14 predicted a soft landing. Opinion was divided as to the impact of such a fall.
Willem Buiter of the London School of Economics believes house prices will fall by about 30 per cent in the next two years with no major impact on the UK economy - "On average, lower house prices don't make the UK consumers worse off. They lose as owners but gain as renters."
The economists said the main risk to economic stability was the effect of the credit squeeze. In second place was a bigger slowdown in the US, Europe or China, followed by inflationary pressures then the impact of a slowdown in the UK housing market.
In other news, the FT predicts an eight per cent rise in business insolvencies this year compared to 2007, according to a survey from credit management firm Euler Hermes.
More form the FT here. ®