UK economy 'no longer in free fall'

The British economy is no longer in free fall and a recovery next spring is likely, a UK economic think tank has said.

Stabilising markets and the easing of credit conditions may well mean that the worst of the recession is over, say Ernst & Young in a report released today.

It is forecasting the UK economy to shrink by 3.5 per cent this year and by 0.1 per cent in 2010.

However, it also said that the backdrop to Wednesday's Budget is "bleak" and warned that chancellor of the exchequer Alistair Darling has "limited options" in his spending plans.