Europe News

Clearly Risk of Recession in UK: BoE's Broadbent

Reported by Steve Sedgwick, Written by Shai Ahmed

There is clearly a risk that the UK will head into recession in the final quarter of the year, the Bank of England's Monetary Policy Committee member Ben Broadbent told CNBC Thursday.

Sharon Lorimer

"The forecast for growth is around zero for the fourth quarter so the chances of it being negative in that quarter are roughly one half.

Growth is weaker than its trend rate therefore the spare capacity in the economy is likely to grow," Broadbent said.

He did not rule out the prospect of further monetary stimulus for the UK economy but said decisions could only be taken on a meeting-by-meeting basis.

Ralph Silva, research director at Silva Research Associates disagreed that any further quantitative easing would be necessary .

"I think the MPC has gone as far as they can, the only thing they can do is make sure it doesn't get much worse, they cannot push us to recovery," Silva said.

That, he said was down to politicians but they were 'cowards'.

"The politicians can affect that but they have chosen not to do that, they are not doing enough, they are cowards.

They have to take big decisions but they are simply not doing that," Silva added.

A former Bank of England deputy governor told CNBC that the situation in Europe was 'absolutely disastrous' with a recession in the UK probable and one in Europe very likely.

"Yes there is a crisis in the euro zone , there is doubt about the whole euro project. The lack of confidence in Europe is having a big impact on the economy.

We are now looking at very likely a recession in Europe and quite probably a recession in the UK," Sir John Gieve, former deputy governor of the Bank of England, told CNBC.

He said attempts by the euro zone policymakers to resolve the crisis and prevent contagion across the region had failed.

"They have this EFSF which they could activate but they are not doing it with enough conviction and enough scale to solve the problem, so we seem to be in a chronic situation," Gieve added.

Clear Risk of a Recession in the UK: Broadbent

He suggested that the UK would more than likely see more QE in the near future.

"Your bets would have to be for more QE in the UK in the next three months," he said.

Moorad Choudhry, head of business treasury at RBS told CNBC it would make little difference as there was little to be optimistic about the UK economy.

"[Quantitative Easing] did its job in the deflationary environment of 2009 to 2010, it is not going to make any difference. Further QE is not what the measure is. It gets messy for the UK in 2012." Choudhry said.