UK economy to contract 0.5 per cent says leading think-tank

The UK economy will contract by 0.5 per cent this year but grow by 1.3 per cent in 2013, according to a leading economic think-tank.
The National Institute for Economic and Social Research 'Prospects for the UK economy' report stated the 'Jubilee effect' reduced growth by 0.4 per cent in the second quarter.
The ONS announced in July that the economy had seen a fall of 0.7 per cent in the second quarter of 2012.
The report said: "The deterioration in the UK economy has been more pronounced than even we expected.
"We estimate the 'Jubilee effect' reduced estimated growth in the second quarter by 0.4 percentage point, with a corresponding boost to be expected in the third quarter."
The think-tank forecast the economy could grow by 1.3 per cent in 2013 and 2.4 per cent in 2014.

A 'dysfunctional financial system' was blamed for the flat level of output over the past two years and the think-tank said it was 'puzzled' by the divergence between poor growth and a strong labour market.
Inflation, which stands at 2.4 per cent, could fall below the Bank of England's two per cent target by the end of 2012.
Inflation figures will be announced by the Office for National Statistics on 14 August.
NIESR welcomed the new Funding for Lending scheme which was opened last week but said the design of the scheme meant losses were likely.
"Having a clear plan for the financial infrastructure the UK economy requires would be far better than this piecemeal approach.
"It remains the case that there is scope for a less aggressive path of fiscal tightening. The Government should consider on-balance sheet funding of key projects, concurrent with a comprehensive restructuring of banks and key-funding markets."