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Economy May Be Slowing But Its Changing For The Better - The Times Jan 08

The economic outlook for Britain has changed significantly during the past twelve months. The liquidity crucnh, for instance, means that there is now less mortgage finance available and it is more expensive.

Most commentators agree that tougher economic conditions will prevail this year.

The UK is far from doom and gloom, however. We expect a healthy rebalancing of the economy to begin this year as consumer spending and house price growth slow and personal savings increase.

House prices still increased in all regions during 2007. The biggest rises were in London, The South East and Scotland.

The medium term prospects for the housing market across the country are strong, partly because the government's target of building three million new homes by 2020 is more than half a million short of what will be required, based on official projections.

Sound economic fundamentals will also support house prices. The economy is in good health; employment levels are high. The economy is expected to continue delivering successive quarters of GDP growth in what is already the longest period of unbroken growth on record.

We expect the Bank of England to cut rates further this year to insulate the economy from anything more than a gradual economic slowdown. The Monetary Policy Committee is likely to cut the base rate at least twice and further reductions are more than possible and could occur fairly rapidly.