BBC Monday, 29 October, 2001, 02:21 GMT

World 'on brink of economic slump' Consumer spending is keeping the UK out of recession

The world may be on the brink of the "worst economic downturn" since World War II, according to accountants Deloitte & Touche.

And they predict that although the British economy has been relatively robust, there is no doubt it will see a severe slowdown, with growth expected to decelerate from 3% last year to just 1.7% next year.

There are signs of "acute economic weakness" in the euro-zone, according to the prediction.

It also suggests the United States could fall into outright recession.

And in Japan and much of Asia - already in recession - there is no prospect of immediate respite.

D&T's economic adviser, Roger Bootle, believes the UK will "escape a recession proper", due to consumer finances being in good shape, low unemployment, and lower interest rates.

But he warned that were consumer spending to collapse, "there is no doubt that the UK too would experience recession".

To prevent this, D&T predicts, UK interest rates will fall by at least 0.5% to 4%.

And in the US it believes they will drop to a maximum of 2%.

Mr Bootle predicted that the suicide hijack attacks on the US would be blamed for the downturn.

"While the aftermath of the September outrages will, of course, be negative, the lesson of history is that the economic significance of non-economic events is often exaggerated at the time.

"The world is set for a period of very low inflation, low interest rates and weak growth - but little of this will be due to the events of 11 September," he concluded.

A separate survey by accountants Pricewaterhouse Coopers (PWC) also predicts that although UK manufacturing - already in recession - will remain relatively weak, the downturn will be much less severe than in the US, Japan and Germany.

It suggests that "unless global conditions deteriorate dramatically, the UK as a whole should avoid recession over the next year".

PWC chief economic adviser, Rosemary Radcliffe, said: "Following the events of 11 September there is unparalleled uncertainty about global economic prospects.

"But the UK is in better shape than most other major economies and, given the benefit of lower interest rates and increased public spending, this should help the UK economy as a whole to avoid recession."

-- Anonymous, October 28, 2001