BRITAIN’s economy could be heading for its worst year for 15 years, analysts warn. They say growth in 2008 could be weaker than at any time since the long upturn began in 1992.

After the Bank of England downgraded its growth forecasts last week and warned of further risks, economists say growth next year will be below 2%, threatening a rise in unemployment.

The weakest year of growth in the past 15 years was relatively recently, 2005, and saw the economy expand by only 1.8%.

The latest compilation of forecasts from Consensus Economics shows that five forecasting groups already have 2008 predictions below that, and others are revising their forecasts.

“This is a very difficult time to interpret the economic tea leaves,” said Graeme Leach, chief economist at the Institute of Directors. “The evidence to date suggests we shouldn’t be too pessimistic, but my instinct suggests we’re entering the most difficult period for 15 years.”

Michael Saunders of Citi revised his forecast for 2008 down from 2.2% to 1.9% on Friday and warned that growth might turn out to be weaker still.

“In 2007, UK growth probably has been the highest in the G7 [the Group of Seven industrial nations],” he said. “But, for 2008 we expect the UK to suffer the sharpest slowdown in the G7, with the downturn led chiefly by consumer spending and housing investment.”

Analysts are split on when the Bank’s monetary policy committee might respond to the slowdown in the face of continued inflationary pressures. While its inflation report last week was consistent with at least two Bank rate cuts next year, it said nothing about timing.

Geoffrey Dicks, chief UK economist at RBS Global Banking and Markets, said the Bank could move quickly if the evidence coming in over the next two to three weeks is very weak.

Explore Economics

• Pre-Budget Report 2009

• Budget 2009

• World Economic Forum

• The Times MPC

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive