Pound falls as OBR says economy set to shrink by 2% in long recession

The Office for Budget responsibility has said the recession is set to last ‘just over a year’

After delivering his autumn statement, Jeremy Hunt met pupils at St Jude’s Church of England Primary School in south London (PA)

The pound fell sharply on Thursday after Jeremy Hunt’s autumn statement revealed a painful era of austerity ahead while the fiscal watchdog forecast Britain’s economy will shrink by 2% over a lengthy recession.

It was the second time in a row that the currency fell against the US dollar after a Budget, losing more than 1% by the end of the day’s trading.

Shares also fell, the FTSE 100 Index 0.7% closing lower at 7301.8, while gilts – UK government bonds, that were at the centre of the recent mini-Budget market chaos – edged up slightly in a sign of investor concerns over the economic prospects.