Britain is facing a lost decade of economic growth despite the economic recovery, the latest forecasts from a respected think tank suggest today.

The National Institute of Economic and Social Research (NIESR) says that although it expects relatively strong GDP growth over the coming years, it thinks output per head of population will grow more slowly. This means the population will continue to grow along with the overall economy.

The think tank said that, as a result of this divergence, per capita GDP will not return to its 2007 peak until 2017, implying 10 years of economic stagnation in Britain, according to this particular economic measure.

Many economists argue that GDP per head is a better measure of a nation’s economic performance than GDP because it takes into account the growth of the population.

The forecast represents a challenge to the claims of supporters of the Coalition that the economy has been restored to health under the Chancellorship of George Osborne and that living standards will soon begin to rise.

Last week the Coalition hailed the fact that GDP finally returned to its pre-recession peak in the second quarter of the year, with Mr Osborne calling the news a “major milestone”. But NIESR points out today that per capita GDP in the second quarter of this year was still around 4.5 per cent below its level in 2007.