MercoPress. South Atlantic News Agency

UK faces “choppy recovery” in the next two years warns Bank of England

Mervyn King governor of the Bank of England

The UK economy faces a “choppy recovery” over the next two years, the governor of the Bank of England, Mervyn King, has warned. His comments came as the Bank lowered its economic growth forecast and said inflation would stay higher for longer than previously forecast.

The Bank now expects the economy to grow by less than 3% in 2011, down from its previous forecast of nearer 3.5%. It added that a lack of bank lending would limit economic growth.

“It will take many years before bank balance sheets and fiscal positions return to anything like normal,” said Mr King. “In the meantime they will act as headwinds to the recovery.”

Mr King also warned that following an “unprecedented” period the UK economy faced a difficult rebalancing “away from private and public consumption and towards net exports”, and that this could also hit economic growth.

He added that there were some factors helping to keep the economy expanding, most notably the continuing economic stimulus measures and the fall in value of the pound.

And although he said government spending plans were one of the reasons that the Bank had cut its growth forecast, he stressed that the chancellor's cost-cutting plans also reduce the risk of a new crisis for the economy.

However, Mr King said it would be “several years” before the economy adjusts “back to anything we can call remotely normal”.