THE UK’s economy will slow significantly as it is buffeted by the debt storms whipping the eurozone and US, the Bank of England will warn this week.
Bank governor Sir Mervyn King is expected to say that GDP in 2011 will rise by about 1.3% – significantly less than the 1.8% it predicted in May, while its forecasts for next year could also be slashed.
The sluggish nature of the UK’s recovery is expected to be made worse as panic sweeps global financial markets after America’s prized AAA credit rating was slashed and worries persist that Italy and Spain could need a bail-out.
Meanwhile, business secretary Vince Cable yesterday admitted that the UK is in danger of a double dip recession and said living standards will continue to come under pressure unless the banks boost growth by lending more.
His warning follows a week of mayhem on global stock markets in which the UK’s FTSE 100 Index lost nearly 10% of its value, or £150bn, in its worst period of trading since October 2008.
World leaders are reported to be breaking off from their holidays to hold emergency calls in an attempt to resolve the crisis and restore confidence that countries will not default on their debts.
The Bank of England has repeatedly downgraded its forecasts for the UK’s economic growth in recent months as inflation squeezes consumer spending and the Government’s austerity cuts begin to kick-in. Earlier this year it predicted that the economy would grow by 2% in 2011.
