Belfast Telegraph

Home News UK

King warning on royal celebrations

Celebrations for the Queen's Diamond Jubilee are set to throw the British economy into reverse again, Sir Mervyn King has warned.

The Bank of England governor said it was "quite possible" that UK plc would shrink over the next three months.

He also signalled that the country still faced a long battle to get back to the kind of growth it enjoyed before the financial crisis.

Sir Mervyn was asked about the impact of the Jubilee as he appeared before the House of Lords Economic Affairs Committee.

The traditional late May bank holiday has been moved to Monday June 4, and the next day has also been designated a break to mark the event.

"We do expect quite possibly a fall in output in the second quarter, followed by a rise in the third quarter, as we will lose an extra day's work - it doesn't necessarily follow that we will lose that whole day's output - because of the national bank holiday," the governor said.

"Last year we saw that pattern again (due to the royal wedding). We would expect that to happen again."

Sir Mervyn said it was not yet clear whether the eurozone was taking enough action to deal with underlying weaknesses in some members.

He also indicated that continuing pressure on banks to de-leverage was partly responsible for inhibiting their scope to lend.

"Even though funding costs have come down in the first couple of months of this year, they're still higher than they were a couple of months ago because of what's going on in the euro area," he added.


From Belfast Telegraph