Mervyn King, the Bank of England’s governor, has warned that ’people should be concerned’ about the difficult times ahead. He said that interest rates might have to be cut to an all time low below 2 percent to help Britain’s ailing economy. Mr. King even indicated that the Bank of England was prepared to cut rates to 0 percent – or ‘whatever level is necessary’.

Mr. King was delivering the Bank’s quarterly inflation report and announced that the Bank had radically revised its prediction of economic growth of 0.5 percent as previously forecast. The Bank now predicts that Britain’s economy will shrink by 2 percent in 2009, taking £25 billion of the country’s output. Mr. King also said that it is very likely that the UK economy is already in recession. He went on to admit that it was difficult to make accurate forecasts as the ‘exceptional and difficult times’ that has rocked the financial world since the collapse of Lehman Brothers in September.

Experts are warning that a ‘white collar recession’ might be on the cards in the near future, already seeing unemployment rise in retail and financial services. Retail spending is likely to slump even further as people are worried about losing their jobs and stop shopping on the high street. Retail sales are predicted to fall by an estimated £16 billion over the next year. With Christmas coming up, that is not good news for any of us.