Britain faces 18 more months of pain, warns OECD Downgrading its forecast for growth this year from 0.7pc to just 0.5pc, the international think-tank revealed that consumer prices would rise faster than disposable incomes both this year and next. It also warned that unemployment would peak at 9pc in 2013, saying that the current 20pc youth unemployment rate is "of great concern." The prospect of another two years of declining real incomes will come as a shock after Sir Mervyn King, Governor of the Bank of England, said in February: "I think that, insofar as the pressures that squeezed real incomes in the last couple of years are concerned, those have already come to an end by and large." Assessing the outlook for the UK, Pier Carlo Padoan, the OECD's chief economist, said: "You might say there is a slight decrease this year in real household incomes." In 2013, the OECD is forecasting another decline, although Mr Padoan said the figures were within the "margin of error." Households have already suffered the steepest fall in living standards since the 1920s, with real incomes shrinking by 0.2pc in 2010 and 1.4pc in 2011. The OECD's forecasts for disposable incomes to rise by just 1.9pc this year while inflation rises by 2.6pc would suggest a tighter squeeze this year than in 2010 but not so deep as 2011. The OECD blamed the weak economic outlook on households "containing spending as real incomes decline," but said growth should start to pick up in the second half of this year. Its 2012 growth outlook is below the 0.8pc predicted by both the Government's official forecaster and the International Monetary Fund. Although the Paris-based group reckons growth will recover to 1.9pc in 2013, that forecast has been downgraded as well since November's 2.1pc projection. Despite the UK's double dip recession, which the OECD correctly predicted, and the weak recovery, Mr Padoan said the Government should stick to its austerity programme. "We don't think the fiscal programme should be reconsidered," he said, pointing out that the OECD judged that the UK is past the worst of the economic slowdown. It has allowed the Government to regain credibility. We would not see the need in spite of the fact that the situation is not improving, as that would risk losing the gains made at hard cost in terms of credibility. He also suggested that the Bank should only restart its £325bn quantitative easing programme "if things deteriorate." The crisis in the eurozone remains the UK's biggest risk, the OECD added.