Britain's economy is likely to fall into recession for the first time in 16 years, dragged down by the global economic crisis, Prime Minister Gordon Brown said on Wednesday. Brown, who for a decade has promised an end to “boom and bust”, echoed comments made late on Tuesday by Bank of England Governor Mervyn King. “Having taken action on the banking system, we must now take action on the global financial recession,” Brown told parliament. “(It) is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too.” Conservative leader David Cameron said Brown was a “master of dodgy accounting” whose high public borrowing during the economic good times would make it harder to weather the downturn. “For years you were telling us about the beauties of prudence with a purpose,” Cameron told Brown during prime minister's questions. “Now you are telling us about the joys of borrowing without limit. Doesn't that show just how ridiculous you now sound?” Their exchange in the Commons came after the Bank of England governor said the economic outlook was very uncertain after an “extraordinary, almost unimaginable sequence of events”. “Indeed, it now seems likely that the UK economy is entering a recession,” King said in a speech in Leeds. Bank minutes released on Wednesday showed that all nine of its Monetary Policy Committee members backed this month's emergency interest rate cut. However, analysts said minutes of their Oct. 8 meeting shed little light on how far and fast borrowing costs will fall. Many economists are predicting the central bank will repeat this month's 50 basis point cut in interest rates - itself the biggest in seven years - in November, but King gave little away, saying policymakers could not forget about inflation. “There are no clues either from the minutes or from Mervyn King's speech last night on the size of any subsequent easing,” said Philip Shaw, chief economist at Investec. The minutes of the meeting, when rates were cut in conjunction with other major central banks, simply said the economic outlook had got a lot worse but it was not clear how far rates would need to come down because of the market turmoil. “In the current financial market turbulence, the reduction in Bank Rate that would ultimately be required to meet the inflation target was very difficult to gauge,” the minutes said. Financial markets are betting the scale of cuts will have to be massive and borrowing costs could even fall next year below the 48-year low of 3.5 percent they hit in July 2003. Two-year gilt yields hit a 5-year low of 3.20 percent and the pound earlier also hit its lowest level against the dollar since 2003 at $1.6203 before recovering some ground. Figures on Friday are expected to show the British economy shrank in the third quarter of 2008 and the respected National Institute of Economic and Social Research predicted output would fall by 0.9 percent over 2009. King briefed the other eight policymakers about the discussions of a coordinated move with other central banks and then invited them to decide whether to join the action, minutes of the Oct. 8 meeting showed. The MPC judged that the financial market turmoil and economic data over the month pointed to a sharp deterioration in the prospects for the economy and had shifted the risks to the inflation outlook decisively to the downside. The minutes noted that while inflation, now running at 5.2 percent, could stay high for a while, the risk of it feeding into higher wages had diminished because of the weaker outlook. “Oil and many other commodity prices were lower. The exchange rate had recovered some of its most recent falls but remained volatile,” the minutes said. “The increase in slack in the labor market meant that it was less likely that cost pressures would feed through into high wage growth.”
