UK economy to hit bottom next year -New Star

The UK economy will hit a trough in the second quarter of next year and bump along the bottom before recovering in the second quarter of 2010, New Star Asset Management's economist Simon Ward predicted on Wednesday.

Ward's assessment of the British economy was more pessimistic than that of the Bank of England, which expects a recovery starting in the third quarter of next year. "In the third quarter next year, we will still probably be in recession," Ward said in a press briefing.

Britain's economy shrank by 0.5 percent in the third quarter, its biggest fall since 1990, as household spending fell by its biggest amount in more than a decade.

Ward also said that Britain's house prices would reach a trough in 2010 and would not return to their 2007 peaks before 2015.

New Star, which has been hit by money outflows during the financial turmoil, said on Monday it had entered fresh debt talks with banks. Its shares were down 3.0 percent at 1200 GMT on Wednesday having lost more than 96 percent this year.

The economist said equities on a long-term view were attractive and added that stocks, such as consumer cyclicals, which have been hit hard, had potential to outperform.