UK recession to be longer and deeper than expected

According to the City Watchdog, the recession is likely to be longer and deeper than first anticipated following the review undertaken by the Financial Services Authority (FSA) on the conditions and pressure on both the financial sector and the housing market.

The FSA announced that both the banking and housing sectors are going to face even deeper struggles and that the average prediction of the reduction in output being just 2.2 percent has been described as overly optimistic given the pressures faced.

The FSA’s latest Financial Risk Outlook agrees with the latest statement by Dominique Strauss-Kahn, the director of the International Monetary Fund, who said that the advanced economies of the world are already in depression and that the worst-case scenario cannot be ruled out.

The FSA have concluded that the effects of the stimulus package and the role of monetary easing, most notably the VAT cut, remain unclear, although the risks are heavily steeped towards a continued downturn that is longer than expected.

This ties in with the gaffes by both Gordon Brown and minister, Ed Balls, who have fuelled speculation that the effects of the downturn will still be felt for the next decade and a half.

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