Bank quells recession fears after slowdown

BRITAIN will avoid recession this year despite ‘entrenched Brexit uncertainties’ damaging the economy, according to the Bank of England.

The central bank said it expects the economy to grow by 0.2pc in the current, third quarter of the year following a contraction of 0.2pc in the second.

That would mean Britain has avoided recession – defined as two quarters of decline in a row.

But the Bank warned that ‘political events could lead to a further period of entrenched uncertainty’ – and hinted interest rates could be cut to boost the economy.

The comments came as the Organisation for Economic Cooperation and Development claimed a No Deal Brexit could tip Britain into recession.

‘A No Deal exit would be costly in the near term, potentially pushing the UK into recession in 2020 and reducing growth in Europe considerably,’ the intergovernmental economic organisation said yesterday.

The Bank of England left UK interest rates unchanged at 0.75pc yesterday – setting it apart from the US Federal Reserve and European Central Bank, which have cut rates in recent days.

But setting the scene for rate cuts in future, Bank officials said that prolonged uncertainty over Brexit would dent growth and dampen inflation.

Central banks typically cut rates if inflation remains too low.

In a sign that there is more to worry about than just Brexit, the Paris-based OECD cut its global growth forecasts from 3.2pc to 2.9pc for this year and from 3.4pc to 3pc for 2020.

The global economy has not grown that slowly since the financial crisis.

‘The global economy has become increasingly fragile and uncertain,’ the OECD said.

‘Escalating trade conflicts are taking an increasing toll on confidence and investment.’