Top forecasters have suggested that the outlook for the UK economy next year is bleak as business confidence is fading due to recent results.

Ernst & Young Item Club has predicted that growth in 2009 will be just 1%, as living costs rise and falling house prices have a negative effect on consumer spending. They went on to say that employers confidence had fallen to its lowest level since 1996.

A minimal growth of disposable income combined with a sharp rise in food and fuel costs, means that spending on non-essential items will be cut.

On the other hand, London retailers have seen a strong sales growth over the past month. London’s retail performance over the past month implies that consumers are not tightening their belts as much as people in other parts of the country.

The British Retail Consortium said that much of the growth was down to better weather and tourist spending, combined with retailer discounts and early summer sales.