U.K. Economy Will Shrink 4.4% This Year, Ernst & Y

July 19 (Bloomberg) -- The British economy will shrink 4.4 percent in 2009 before recovering in 2010, Ernst & Young’s Item Club will say tomorrow.

The forecast by the research group, which uses the same economic model as the U.K. Treasury, is worse than the 3.5 percent contraction predicted in April. Tomorrow it will also revise up the prediction for 2010 to show the economy expanding 0.5 percent instead of shrinking 0.1 percent.

U.K. gross domestic product plunged by the most in a half- century in the first quarter, prompting the central bank to cut interest rates to a record low and start buying assets with newly created money. Bank of England Deputy Governor Charles Bean said last week that the economy may return to quarterly growth by the end of this year.

“The economic patient has been in trauma, but thanks to the paramedics at the Treasury and the Bank of England, who pumped billions of pounds worth of medicine into the economy, the patient has been stabilized for now,” Item Club Chief Economic Adviser Peter Spencer will say in a statement. “But it remains unclear how quick and complete recovery will be and there is still a serious chance of a relapse.”