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.

The euro continued to climb higher against the dollar today, ahead of the European Central Bank’s decision about interest rates tomorrow. It is widely expected that the ECB will raise interest rates, the first time since June 2007.

The dollar had seen a brief boost on Tuesday after better than expected ISM manufacturing data was released, but this was short lived as traders remain unconvinced that the US economy has turned a corner.

The pound fell against other currencies as UK Consumer Price Index (CPI) rose by more than expected in May, reinforcing the views of Mervyn King the governor of the Bank of England who warned that rising food and energy costs could push UK inflation higher than 4% by the end of the year.

UK CPI was up to 3.3% in May, compared to just 3% in April, this was mainly due to the rising cost of meat products and vegetables. An increase in energy bills was also an important factor, as well as rising book, stationery and foreign holiday costs.

UK motorists are being urged to buy fuel only if they need it, as tanker driver start a four day strike over pay.

The tanker drivers, that deliver fuel to Shell forecourts in the UK, went on strike this morning and have picketed numerous sites throughout the UK.

A last ditch meeting, aimed at resolving the issue ended without agreement as the Unite Union rejected an enhanced pay offer.

It is thought that the knock on effects of the strike will be felt almost immediately.

For the second month in a row sales on UK High Streets have fallen, according to figures from the British Retail Consortium (BRC). Like-for-like sales fell by 1.5% in April compared to the same month in 2007. Total sales, which include shops that were not running last year rose by 1.0% last month.

The BRC's figures only take into account the value of sales from a selection of retailers. It is the first time that the BRC's figures had fallen for two consecutive months in a row since the first quarter of 2005.