Bank of England governor tells Britain to brace for devastating financial crisis as OECD warns country is facing double dip recession
Economy will shrink in final three months of this year and first three months of next, says OECD
Blow to Chancellor as Office of Budget Responsibility to reveal that government borrowing must rise
By Hugo Duncan and Tim Shipman
29th November 2011
Britain should brace itself for a devastating financial crisis, the governor of the Bank of England warned last night.
Sir Mervyn King told MPs there was no doubt the banking system was ‘less safe’ than three months ago and might not be strong enough to withstand a eurozone meltdown.
He spoke out amid fresh warnings that the UK is set to plunge into a double dip recession.
The Organisation for Economic Cooperation and Development said the economy will shrink in the final three months of this year and the first three months of next.
The bleak warnings were a blow for George Osborne on the eve of today’s crucial autumn statement.
The Chancellor will be hit by another dire growth warning today when the independent Office of Budget Responsibility issues its prediction for economic performance.
The OBR will reveal that borrowing has to rise and that Mr Osborne’s plans to eradicate the deficit by 2015 will be blown off course. The Chancellor plans to recast his goal as something to be achieved after five years – giving him until 2016-17 instead.
The one glimmer of light is that the record low interest payments the government is making on its debt mean Mr Osborne will have to find £22billion less over the next three years.
The Paris-based OECD think-tank warned of a ‘deep depression’ in Europe and beyond if the single currency debt crisis spirals out of control.