Even if a solution is reached quickly, the chance is as much as 50%, the National Institute for Economic and Social Research said.
Eurozone leaders are due to meet at a G20 summit later on Thursday with fresh uncertainty hanging over the three-pronged rescue deal reached last week, which was designed to ease the region’s debt burden.
Greece’s finance minister and prime minister appear to be at odds over the bailout package. Meanwhile, China said it will not invest in the European Financial Stability Fund (EFSF) – a key part of the rescue solution – until the situation with Greece has been clarified.
The NIESR report suggest that, whatever the outcome of the G20 meeting, the UK could return to recession by the end of next year.
“There is a weakness in demand from both consumers and investors, but the main downside risk is from the eurozone crisis,” said the body’s director, Jonathan Portes.
He called on the government to rethink its policy of tough spending cuts in light of weak demand.
“The impact of the government’s tough fiscal policy has been negative. Going forwards, they should loosen policy moderately to help growth,” he said.
Figures released this week showed the economy grew by 0.5% between July and September.
