The chances of the UK falling back into recession are 50 per cent, regardless of the outcome of the euro crisis, according to the National Institute of Economic and Social Research.

The chances of the UK falling back into recession are 50 per cent, regardless of the outcome of the euro crisis, according to the National Institute of Economic and Social Research (NIESR).

Forecasts estimate a 50-50 chance of recession if there is a successful resolution to the euro crisis, but if policymakers continue to ‘muddle through’ the risk is heightened to 70 per cent, the institute’s latest UK Economy Overview states.

It has also been estimated that the UK economy will not return to its pre-recession peak until the end of 2013, which would make it the slowest recovery since the end of World War I.

These announcements come just two days after the Office of National Statistics (ONS) announced that the economy grew by 0.5 percent in the third quarter (Q3), which was higher than expected.

The ONS reported that output of the production industries increased by 0.5 per cent and service industries output jumped by 0.7 per cent in the period, with services accounting for more than three quarters of the nation’s total GDP.

Speaking at the GDP briefing on Tuesday, ONS chief economist Joe Grice said, ‘Yes there is clearly growth but it is not very strong growth.’

NIESR says it expects the economy to grow by 0.9 per cent in 2011 and by 0.8 per cent next year.

Chief economist at the British Chambers of Commerce, David Kern, comments, ‘Early indications from the fourth quarter are concerning, and if the situation in the Eurozone worsens there could be serious adverse repercussions for the UK.’

However, NIESR says that while the Eurozone developments will reduce economic growth, recent poor performance has been driven by weak domestic demand and this will continue into 2012.

Unemployment is also expected to rise next year with forecasts suggesting a further 8.9 per cent increase by the end of 2012.