New man at the Bank left under no illusions over perils facing economy

UK faces slow recovery as growth forecasts slashed

Incoming Bank of England Governor Mark Carney was left under no illusions over the perils facing the British economy today as UK growth prospects were slashed again.

The Organisation for Economic Co-operation and Development  is now pencilling in a 0.1% contraction for the UK this year and growth of just 0.9% in 2013 - well below its last set of forecasts in May.

The latest gloom comes as the independent Office for Budget Responsibility prepares to make a knife-edge verdict on the state of the public finances and Chancellor George Osborne's fiscal rules.

The OECD said today that the Chancellor could be forced to abandon the second of his targets - to put debt as a share of the economy on a downward course by 2015/6 - if the economy disappoints. The thinktank, which is worried about the lingering risks from the eurozone crisis and the impact of food and energy bills, said: "In the event of lower than expected growth, the flexibility of the fiscal mandate should be utilised... even though this may imply pushing out the debt target."

Sir Mervyn King , who told MPs on the Treasury Select Committee that the Bank was "in very good hands" with the Canadian, repeated his warning over the recovery. He said: "It may be unreasonable to expect anything other than a slow and protracted recovery absent of a further fall in the real exchange rate."

There was at least better news on the economy from the Office for National Statistics, which left its growth estimates for the July to September quarter unchanged today at 1% - the best in five years - despite fears of a downgrade. Shoppers hit the high street with a vengence over the summer with a 0.6% rise in consumer spending also the strongest since 2010.

The economy enjoyed the steroid boost of an extra working day compared to the April-June quarter as well as a "positive and significant effect" on spending from the Olympics and Paralympics. Higher spending from foreign tourists - which counts as exports - helped the UK's trade position as earnings from UK visitors jumped 9% in August despite a 5% fall in visitor numbers compared to a year earlier.

But year on year the economy is 0.1% smaller, the ONS added, worse than its previous estimate. More timely indicators have also been downbeat after a 0.8% slide in October retail spending, weak business surveys and warnings from Sir Mervyn that the economy could shrink again during the current quarter.

Nida Ali, economic adviser to the Ernst & Young ITEM Club said: "These figures do little to change the broader picture of a fragile economy. The near-term outlook is pretty gloomy with monthly economic indicators pointing to negligible growth in the fourth quarter."

PROMOTED VIDEO
Life and Style
The veteran poverty campaigner Sir Bob Geldof issues a stark challenge to emerging economies at the Melbourne HIV/Aids conference
health
Arts and Entertainment
Benedict Cumberbatch and John Malkovich talk Penguins of Madagascar at Comic-Con
comic-con 2014Cumberbatch fans banned from asking about Sherlock at Comic-Con
Arts and Entertainment
Chris Pratt stars in Guardians of the Galaxy
filmGuardians Of The Galaxy should have taken itself a bit more seriously, writes Geoffrey Macnab
News
Sir Chris Hoy won six Olympic golds - in which four events?
news
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
Lars Ulrich of Metallica performs on the Pyramid Stage at Glastonbury 2014
people
Arts and Entertainment
film
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
video
Life and Style
tech
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
film
Arts and Entertainment
Up my street: The residents of the elegant Moray Place in Edinburgh's Georgian New Town
tvBBC's The Secret History of Our Streets reveals a fascinating window into Britain's past
Extras
indybest
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Business Analyst

£300 - £350 per day: Orgtel: Job Title: Business Analyst Rate: £300 - £350 per...

Trade Desk Specialist (Linux, Windows, FIX, Finance, Networks)

£60000 per annum: Harrington Starr: Trade Desk Specialist (Linux, Windows, FIX...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Project Manager - ETRM/CTRM

£70000 - £90000 per annum + Job Satisfaction: Harrington Starr: Project Manage...

Day In a Page

Backhanders, bribery and abuses of power have soared in China as economy surges

Bribery and abuses of power soar in China

The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

Highland terriers steal the show at opening ceremony

Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
German art world rocked as artists use renowned fat sculpture to distil schnapps

Brewing the fat from artwork angers widow of sculptor

Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

BBC takes viewers back down memory lane

The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

Nicolas Cage shines in low-budget drama Joe

Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

Make your own ice lollies and frozen yoghurt

Think outside the cool box for this summer's tempting frozen treats
Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

Fiesta is UK's most popular car of all-time

Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
10 best reed diffusers

Heaven scent: 10 best reed diffusers

Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
Commonwealth Games 2014: Female boxers set to compete for first time

Female boxers set to compete at Commonwealth Games for first time

There’s no favourites and with no headguards anything could happen
Five things we’ve learned so far about Manchester United under Louis van Gaal

Five things we’ve learned so far about United under Van Gaal

It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little
Screwing your way to the top? Good for Lana Del Rey for helping kill that myth

Screwing your way to the top?

Good for Lana Del Rey for helping kill that myth, says Grace Dent
Will the young Britons fighting in Syria be allowed to return home and resume their lives?

Will Britons fighting in Syria be able to resume their lives?

Tony Blair's Terrorism Act 2006 has made it an offence to take part in military action abroad with a "political, ideological, religious or racial motive"
Beyoncé poses as Rosie the Riveter, the wartime poster girl who became a feminist pin-up

Beyoncé poses as Rosie the Riveter

The wartime poster girl became the ultimate American symbol of female empowerment
The quest to find the perfect pair of earphones: Are custom, 3D printed earbuds the solution?

The quest to find the perfect pair of earphones

Earphones don't fit properly, offer mediocre audio quality and can even be painful. So the quest to design the perfect pair is music to Seth Stevenson's ears
US Army's shooting star: Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform

Meet the US Army's shooting star

Lt-Col Steven Cole is the man Hollywood calls when it wants to borrow a tank or check a military uniform