UK recession looms
The UK is drifting into a recession, leading economists warned yesterday, as approvals for British home loans in June hit their lowest level since records began and retail sales fell at their fastest pace in at least a quarter of a century.
Home mortgage approvals, loans that are agreed but not yet made, fell in June to 36,000 from 41,000 in May, according to the Bank of England. The unexpected drop points to further sharp falls in house prices in the months ahead.
Approvals in the three months to June stood at just 134,000, well below the 191,000 low recorded in the fourth quarter of 1992 when Britain was in the middle of the last housing slump.
The data came at the same time as the Confederation of British Industry’s monthly retail sales balance fell to -36, its weakest since the survey began in 1983, as sales of white goods, furniture and carpets collapsed.
Analysts warned that the weakening housing market could be forcing consumers to cut down.
“Both spending and housing market activity and prices are deteriorating in tandem. The result would be a further slowing in the economy, which risks drifting into recession over the coming quarters,” said George Buckley, chief economist at Deutsche Bank.
Michael Hume, economist at Lehman Brothers, said he continued to expect a recession, warning the economy was “rapidly losing momentum.” He expects the Bank of England to start cutting interest rates in November in response.