UK recession ‘35% likely’

THERE is now a 35 per cent probability of recession in the UK, an authoritative economic report has said.

Experts at investment bank Lehman Brothers also said that the Bank of England may be forced to make dramatic interest rate cuts in the same way as the Federal Reserve has in the United States and see rates falling to four per cent by the end of 2009.

The report, titled Downward Spiral, said that prospects are particularly bleak for the next two years and possibly beyond.

It also forecast house prices would fall eight per cent over the two year period.

Lehman’s chief European economist Michael Hume expects the Bank to slash interest rates from 5.25 per cent down to four per cent or lower.