Recession conditions will be alleviated by cheap fuel for consumers, it has been suggested.
Recent falls in wholesale oil prices could benefit the UK economy, a leading thinktank has indicated.
Ernst & Young's ITEM club has released new data, suggesting that 2009's forecast GDP contraction in Britain could be lessened by 0.3 percent if oil stays at $40 per barrel.
Currently, the government predicts that the economy will shrink by 0.75-1.25 percent over the course of 2009. However, other analysts have predicted a contraction of up to three percent.
Oil has been subject to a precipitous price decline since the commodities boom of the summer - when it hit an all-time high of $147 a barrel.
Hetal Mehta, senior economist at the Ernst & Young ITEM Club, was quoted by Citywire as saying: "Lower oil prices will feed into lower production costs then filter down into lower consumer prices.
"Were oil to stabilise at around $40 per barrel, this could reduce the contraction in GDP by 0.3 percent next year and add 0.6 percent to growth in 2010."
Latest GDP data from the government shows that the economy shrank by 0.6 percent over the three months to September 2008. The October-December figures are also expected to show negative growth, fulfilling the technical requirements for recession conditions.
The general economic downturn which has afflicted nations in the developed world over recent months was caused by the global credit crunch, which has constricted lending from banks.
