Recession Fears: Bank of England facing interest rates decision

Jul 08, 2008 | Comments 1


Many UK businesses have been showing fresh concerns that the UK could be heading into a recession, the first since the 1990’s. The Bank of England now has a tough choice to make, as inflation still shows no sign of shrinking.

The problem is the Bank of England will need to justify their choice if they decide to lower interest rates, the only way that they could justify lowering the cost of borrowing, is if there is hard proof that the current economy is in a downwards spiral for six months continuous.

Many lobby groups along with the British Chambers of Commerce are now calling upon the Bank of England to lower interest rates, the business sector still maintain that we are on the verge of a recession; they also fear that as a result unemployment could rise to as much as 300,000 by the end of the year.

The Manufacturing sector are already reporting that their business is suffering, also there have been reports that the second-hand car market has also slowed down. This shows that people now have less money to spend.

The Bank of England is expected to keep interest rates at 5 percent this month; however it seems as if they are stuck between a rock and a hard place.

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Filed Under: Interest Rates

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  • http://www.thewif.org.uk david hill

    Gordon Brown, his government, opposition politicians and Whitehall Mandarins are all to blame for why the UK economy is not fit-for-purpose in the 21st century. They have all based their economic theories over the past 30-years on the ‘service industry’ phenomena that is highly susceptible to a global turndown unlike to a lesser extent, the manufacturing/industrial sector. Unfortunately now, the banks will not support that part of our economy, which has the propensity to weather a recession. They never have done as service industries have always come first and where our financial institutions have been progressively programmed and brainwashed in this way. Indeed, the banks do not understand also that only by having a high-tech manufacturing sector can any nation survive in the long-term in the 21st century. In this respect if they need advice, one has only to look at China for a comparison. With in excess of US$1.5 trillion in foreign reserves now that are increasing at over US$30 million a day anyone with any financial intelligence should understand this quite clearly and where manufacturing is king. Unfortunately our astute financial masters do not. No recession in China I can tell you, either now or in the future. The reason, the Chinese are the greatest savers in the world at 40% of all income earned and therefore in relative terms, recession proof. Indeed the Chinese economy has been predominantly built upon home savings and not inward investment as many would like us to believe. Therefore when will the penny drop in this country I ask and when will our governments and financial institutions start to understand that only through the principal support for high-tech industries will Britain flourish economically again. For this is the only area of economics that will count in this century I can tell you.

    Therefore it will not be a change in political parties that will transform our economic fortunes, but a change in the way in which people in high places think. That is where it all goes wrong as it is certainly doing today and for many years to come.

    Dr David Hill
    World Innovation Foundation Charity
    Bern, Switzerland
    Charity No. CH-035.7.035.277-9