By Claire West

The Autumn forecast from the Ernst and Young Item Club's latest report sees a return to growth in the second half of this year, leaving GDP down by 0.2% on the year.

The report identifies that credit and liquidity requirements have been relaxed.

The Bank of England’s new Funding for Lending Scheme is designed to increase the flow of credit and reduce its cost, increasing the funding gap, or at least slowing the speed at which it is paid down.

It will reinforce the effect of the revival of the UK mortgage-backed securities market seen in recent weeks. But will this be enough to outweigh the risk aversion that has made the credit crunch so persistent?

In its forecast, the ITEM Club says the outlook for the high street will continue to improve as inflation falls and employment grows. With mortgages becoming more readily available, the housing market will start to pick up, generating activity in associated businesses.

The export growth that the UK badly needs will be harder to find, but ITEM expects a recovery next year, saying that there will continue to be good opportunities in emerging markets for those who can identify them, despite slowing rates of growth.

The move back to balanced growth over the medium term hangs critically upon a recovery in world markets. Even if the US negotiates the fiscal cliff and Euro policymakers do what it takes to save the single currency, these markets will be held back by fiscal retrenchment. Prospects for the rapid growth markets are less bright than they seemed last year.