Bank warns of 'storm for Europe'

Bank warns of 'storm for Europe'

Bank of England governor Sir Mervyn King has cut the UK economy's growth forecasts for the next two years

Bank of England governor Sir Mervyn King has cut the UK economy's growth forecasts for the next two years

First published in National News © by

Bank of England governor Sir Mervyn King has warned of the "risk of a storm heading our way from the Continent" as he flagged the eurozone as the greatest threat to the UK's recovery.

Sir Mervyn's warning came as the Bank said the UK economy will not return to pre-financial crisis levels before 2014 after it cut its growth forecasts for the next two years. The Bank now expects growth of around 0.8% this year.

And the squeeze on consumer spending is set to maintain its grip as the rate of inflation falls more slowly than previously expected, remaining above the Government's 2% target for the next year or so.

While the Bank said it did not see a "meaningful way" of factoring in an extreme financial event - such as the collapse of the euro - into its projections, it said the biggest risk to recovery stems from the single currency bloc, the UK's main trading partner.

GDP is expected to grow around 2% in 2013, compared with the Bank's previous estimate of around 3%.

Meanwhile, the consumer prices index rate of inflation is not likely to meet the 2% target until mid-2013, rather than the end of the year, and will still be around 2.5% at the end of this year.

Sir Mervyn said weak growth and high inflation have been the unavoidable consequences of the financial crisis, that have been "painful for everyone in our society".

However, Sir Mervyn said the bigger picture was one of gradual recovery in growth: "We are navigating through turbulent waters, with the risk of a storm heading our way from the continent."

Prime Minister David Cameron's official spokesman said: "What... the Bank of England forecasts reflect are the same issues taken into account by the Office for Budget Responsibility when it produced its forecasts at the time of the Budget.

"The governor is highlighting higher-than-expected inflation and obviously the biggest risk to the economy is what is happening in the eurozone."

Comments (3)

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11:58am Wed 16 May 12

gramps427 says...

'Sir Mervyn said weak growth and high inflation have been the unavoidable consequences of the financial crisis, that have been "painful for everyone in our society".' I beg to differ; there are many in our society, who have been or still are, involved with creating the crisis that we are in. They are not in a position of having to choose between eating or paying the rent/mortgage, unlike many in the middle and lower end of our society. They are also not in the position of being afraid of the many welfare changes that are coming; these changes are to cut the cost of benefits by billions of £s leaving many people worse off simply because their home has one bedroom more than is needed or because some non medically trained person thinks that they could work based on a 10 minute interview. This Governor like many in the finance industry has no idea of the true cost of their bad judgement and risk taking on society; and most probably don't care so long as they get their bonuses.
'Sir Mervyn said weak growth and high inflation have been the unavoidable consequences of the financial crisis, that have been "painful for everyone in our society".' I beg to differ; there are many in our society, who have been or still are, involved with creating the crisis that we are in. They are not in a position of having to choose between eating or paying the rent/mortgage, unlike many in the middle and lower end of our society. They are also not in the position of being afraid of the many welfare changes that are coming; these changes are to cut the cost of benefits by billions of £s leaving many people worse off simply because their home has one bedroom more than is needed or because some non medically trained person thinks that they could work based on a 10 minute interview. This Governor like many in the finance industry has no idea of the true cost of their bad judgement and risk taking on society; and most probably don't care so long as they get their bonuses. gramps427
  • Score: 0

12:01pm Wed 16 May 12

YorkToff says...

What a banker!
What a banker! YorkToff
  • Score: 0

12:07pm Wed 16 May 12

gramps427 says...

Sir Mervyn said weak growth and high inflation have been the unavoidable consequences of the financial crisis, that have been "painful for everyone in our society". I beg to differ; those in the financial and political world who have caused this misery have no idea of the real pain and suffering their greed and incompetence has caused. They, unlike many in our society, will not be looking at a drop in welfare benefits due to their home having one bedroom too many. Nor will they be fearful of the changes being forced on the sick and disabled in our society simply to reduce the welfare budget but disguised as being a way back to full employment.
Sir Mervyn said weak growth and high inflation have been the unavoidable consequences of the financial crisis, that have been "painful for everyone in our society". I beg to differ; those in the financial and political world who have caused this misery have no idea of the real pain and suffering their greed and incompetence has caused. They, unlike many in our society, will not be looking at a drop in welfare benefits due to their home having one bedroom too many. Nor will they be fearful of the changes being forced on the sick and disabled in our society simply to reduce the welfare budget but disguised as being a way back to full employment. gramps427
  • Score: 0
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