UK stares recession in the face

David Kern, economic adviser to the British Chambers of Commerce (BCC), said in a statement that the UK is now facing serious risks of recession, with a grim outlook which is likely to be prolonged by the state of the world economy.

British industrial output fell much more than expected in May, which has heightened the fear that the economy may be heading towards recession as the fall has made its mark on the value of the sterling and the British stock market.

The Office for National Statistics said industrial production fell 0.8 per cent on the month, which is a huge leap from analysts’ prediction of a 0.1 per cent decline.

In the meantime, the threat of rising inflation seems to be a greater danger than economic growth and so it seems that the Bank of England may be forced to raise interest rates this year although it is hoped that borrowing costs will remain stable in order to rejuvenate the economy.

The UK’s benchmark FTSE 100 Index is showing the signs of a bear market as it declined by 20 percent from last year’s high.

Further bad signs are seen in UK companies as the BCC’s measure of confidence among services companies fell to the lowest level since 1998, whilst cashflow slumped to the lowest since 1992, meaning the health of many UK companies, especially housebuilders are at risk.

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