Bank of England forecasts 'choppy recovery' for UK

11 August 2010

The United Kingdom is facing a "choppy recovery" in the next two years, the governor of the Bank of England has warned.

Mervyn King stated that a lack of bank lending is likely to limit economic growth.

"It will take many years before bank balance sheets and fiscal positions return to anything like normal," said Mr King.

"In the meantime they will act as headwinds to the recovery."

The Bank of England has revised down its growth prediction for the British economy, stating that 2011 will see an increase of less than three per cent instead of the previously forecast 3.5 per cent.

Inflation is also expected to stay higher for a longer period, mainly due to the government's planned VAT increase from the beginning of next year.

Earlier this week, British banks joined together to set up a taskforce that will examine how lending to businesses can be improved in the UK.

By Asim Shah

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