The Bank of doom and gloom

THE Bank of England’s gloomy picture of the state of Britain’s economy over the coming years:

RECESSION

The economy will shrink for 15 months, starting in October, wiping 2.1 per cent off the UK’s output from peak to trough. The recession will be as long as the downturn during the 2008 financial crisis, although less severe.

INFLATION

The rise in the cost of living is set to peak at 13.3 per cent in October – the highest since 1980 – and remain high through much of 2023 as prices continue to rise. Most of this will be driven by the effects of the war in Ukraine.

ENERGY

As western countries try to shun Russia’s fuel supplies, and the Kremlin turns the gas tap off, energy prices are rocketing. The average household’s annual energy bill will rise to £3, 50 when the next price cap rise is pushed through in October – worse than expected.

INCOME

Households’ real income – which takes into account inflation – will fall for two years, the first time this has happened since records began in the 1960s.

INTEREST RATES

The Bank has pushed up its base rate by 0.5 percentage points, the largest hike in 27 years, to 1.75 per cent. While this should help to keep a lid on prices, it will also cause more pain for mortgage holders and other borrowers as the cost of their debt climbs.