UK headed for longest recession in century, says Bank of England

The UK could be facing the longest period of recession since reliable records began a century ago, the Bank of England has warned.

The economy could fall into eight consecutive quarters of negative growth if current market expectations prove correct – with growth only coming back in the middle of 2024.

However, it is expected to be a milder recession than in previous times. From its highest to lowest point, GDP is expected to drop 2.9 per cent – a smaller decrease than the 6.3 per cent fall seen in the 2008 financial crisis.

The Bank announced it was hiking its base interest rate by the largest amount in 33 years as it tries to get a grip on soaring inflation.

The Monetary Policy Committee (MPC) raised the base rate by 0.75 per cent to 3 per cent after warning last month that growing inflationary pressures will require a “stronger response” than previously thought.

It will help pile around £3,000 per year on to mortgage bills for those households that are set to renew their mortgages, the Bank said.

Chancellor Jeremy Hunt said inflation is “the enemy” and said the Bank had taken action in line with their objective to return inflation to target. But he said inflation was “largely driven” by Covid and Russia’s invasion of Ukraine – avoiding any mention of September’s disastrous mini-Budget.

Mr Hunt said “the most important thing the British government can do right now is to restore stability, sort out our public finances, and get debt falling so that interest rate rises are kept as low as possible”.

Rachel Reeves, Labour’s shadow chancellor, said families now face higher mortgages after months of “economic chaos” for the Tory government.

Blaming Rishi Sunak, she added: “As chancellor and now prime minister, Sunak must face up to his mistakes that have led to the vicious cycle of stagnation this Tory government has trapped us in … Working people are paying the price for Tory failure.”

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