Hard times: global downturn

Economic forecasters have warned large parts of the UK economy could fall into recession as a result of the global slowdown and the US terror attacks.

A report by Business Strategies released on Tuesday warned key areas of the North of England would be hit by a recession and in a "worse case scenario" the capital faced a 25 per cent risk of being hit by a downturn.

A second report added to the economic pessimism with figures showing the housing market continued to slow down during October.

The key problems for London will be the number of redundancies made by the City and the sudden drop in tourists, particularly those from the US.

Economists do not paint an entirely gloomy picture, concluding the country should avoid a full-blown recession - putting the odds at just five per cent. Growth will be cut to just 1.7 per cent next year, it is predicted.

Andrew Burrell of Business Strategies said the UK was expected to have a soft rather than hard landing, and would not be comparable to downturns seen in the last 20 years.

"Obviously since the events in the US, the outlook has become more uncertain. Clearly there will be sectoral casualties, with tourism and airline-linked industries likely to be worst affected. London is more exposed to the international economy and is likely to be hit quite hard. It is not just the City itself, it is the travel and services that go with it," he said.

Figures released by the Royal Institution of Chartered Surveyors showed the housing market has continued to slow down during October.

The traditionally quite period in the run-up to Christmas looked set to come early this year as house price inflation fell to its lowest level since January.

Surveyors reporting a rise in property prices during October dropped to 24 per cent from 39 per cent in September.

Prices continued to rise in most regions of England and Wales, though at a slower rate than during the summer. The biggest price gains were seen in East Anglia, Yorkshire and Humberside and the West Midlands.

It predicted the market was likely to remain slow during the next few months and cautioned sellers to price their property realistically if they wanted to sell it.

Spokesman Ian Perry said the housing sector would survive because of low interest rates.

"The housing market held up a lot better than many predicted with price rises slowing down last month rather than falling back. The market will be greatly helped by the recently announced 0.5 per cent reduction in interest rates. As a result, chartered surveyors are confident for market prospects in the new year," he said.