UK Ecomomy Slump 'Could Drag On For Some Time'

A leading financial figure has warned that the current economic slow down could "drag on for some considerable time".

The Bank of England's new Deputy Governor, Charles Bean, says the downturn was "at least as bad as in the 1970s" and that everytime the markets began to rally, "another grenade" exploded.

However, Mr Bean said that growth should pick up and inflation fall next year, "if oil prices and credit markets stabilised".

The Deputy Governor was speaking at the annual conference of the world's top central bankers in Jackson, Wyoming.

He described the mood at the conference as of "considerable caution for the next year".

"We've got our fingers crossed that things will improve. But there is the recognition that there is still a long way to go yet," he said.

He added that it would be "foolish to believe" that the conditions of 1970 could be prevented from happening again.

Mr Bean said he believed he and his colleagues are facing the "biggest financial challenge of the last 40 years".

"Household real income is very low. That will make it difficult for households and there are difficult social issues that will arise.

The Office for National Statistics released figures last week, which showed no growth in the first quarter of this year.

Mr Bean said that "the most important message" was that "the crisis would come to an end".

"This is just a transitory period of subdued growth and we will get through the other side and the growth will resume to more normal levels."

Mr Bean took over as Deputy Governor earlier this year.

Bank of England governor Mervyn King has already warned that that the UK economy is in for a "difficult and painful period".

The credit crunch has already cost thousands of jobs in the financial services industry.

(DS)