LEADING economists warn that the UK economy is entering its most “uncertain period” for 15 years in a series of grim predictions on growth, consumer spending and employment.

Many economists have slashed their forecasts for GDP growth to 1.7%-1.8% – well below the decent 3.1% rate in 2007.

In a gloomy report last week, the Institute of Directors argued that the British economy was facing a period of “stickyflation” with a sharp slowdown in GDP growth against the backdrop of “resistant inflation”.

Graeme Leach, the IoD’s chief economist, said inflation would slow in 2008, but not as fast as output levels, making it harder for the Bank of England to cut interest rates. Inflation is already above the Bank’s 2% target and some economists say expectations of rising inflation are at their highest for eight years.

“Much weaker growth and stubborn inflation will be the UK economic story for 2008. The years of plenty look as though they are about to end,” said Leach, who is predicting GDP growth of only 1.7%. “We are entering the most uncertain economic period for 15 years.”

Other economists, including David Miles and Melanie Baker at Morgan Stanley, are more optimistic inflation will be contained.

Morgan Stanley and Howard Archer at Global Insight warn that inflation is likely to rise in the early months of the new year, before slower growth and rising unemployment lead to an easing of inflationary pressures.

Economists believe factors leading to the slowdown include the impact of the credit crunch on lending to individuals and business, growing weakness in the housing market, a slump in consumer confidence and spending, the global economic slowdown and a fall in public-sector spending.

Consumer spending looks set to fall sharply. Morgan Stanley is particularly downbeat, forecasting a 50% fall to 1.5% next year. Archer forecasts a rate of 1.8%.

WALL STREET JOB CUTS SOAR TO RECORD HIGHS

THIS year is set to be the worst on record for financial job cuts, according to consultants who have been tracking the job market for 15 years, writes Dominic Rushe in New York.

By the end of 2007 more than 150,000 jobs will have been cut from US financial-services posts, according to Challenger, Gray & Christmas.

The final figures, to be released this week, beat the record 116,647 set in 2001 when financial firms cut back following the dotcom-led stock-market crash and the business slowdown following the September 11 terrorist attacks.

To the end of November, Challenger had tracked more than 147,000 financial job losses. That figure has now passed 150,000, but the firm is still adding up December’s redundancies.

Household budgets have already been hit hard by rising food and energy prices. Another looming problem is that the cumulative rises in interest rates of 125 basis points since August 2006 are still working through, with about 1m people due to come off cheap fixed-rate mortgage deals in the next year.

There is also a rising danger of a sharp correction in house prices, with Howard Wheeldon, senior strategist at BGC Partners, forecasting a fall of up to 15%.

The Royal Institution of Chartered Surveyors has forecast a 50% rise in home repossessions, to 45,000 next year. Meanwhile, the property market is rapidly cooling with the number of mortgages approved in November falling by more than 40% on a year ago, according to the British Bankers’ Association.

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