LONDON (ShareCast) - Britain may be stripped of its AAA credit rating as national debt continues to soar through the roof, a report warned Tuesday.
The Centre for Economics and Business Research (Cebr) has predicted another 10 years of austerity in the country as it struggles to tackle its financial troubles.
The think tank projects UK deficit will not be cut back until after 2020 and possibly not until 2023.
This year the nation will see sluggish economic growth at 0.5% and will continue to face a tough road ahead, it added.
The debt/GDP ratio is expected to climb 85% on the Office of National Statistics definition in 2017/2018. It forecasts borrowing of £68 billion during that period- more than double the £31bn expected by the Treasury.
It said the Eurozone recession will impact exports since the relationship between the countries accounts for 45% of UK goods trading. That would dampen the outlook of a significant trade-led recovery this year.
Economic activity is also said to remain heavily subdued in the medium term following government spending cuts and investors holding back.
Weak earnings growth and the uprating of most benefits by 1.0% over the next three years will hold back prospects for household consumption lifting the economy, according to the report.
"Weak economic growth will hold back the deficit reduction programme over the coming years," said Scott Corfe, Cebr Senior Economist and main author of the report.
"In addition, there seems to have been a setback in reducing public spending - despite alleged austerity, we expect government consumption to have grown by 2.8% in real terms in 2012 - the fastest pace of growth since 2004.
"The combination of these two things means that the deficit reduction programme will stretch into not just the next parliament but into the one after that."
Douglas McWilliams, Chief Economist at Cebr and a contributor to the report added: "It will be almost impossible for the UK to maintain its AAA rating in the light of this forecast."
The national debt was around £300bn 10 years ago and rocketed to £800bn under Labour. It is set to hit £1.5tn in the next five years.