Recession to cause deepest plunge in living standards on record, Bank warns

The economy is on course to shrink for five straight quarters for the first time since the 2008 financial crash

- BEN CHAPMAN

Britain will plunge into a year-long recession this autumn in which households will be hit by the deepest fall in living standards on record, the Bank of England has warned. In one of its bleakest ever assessments of UK economic prospects, the Bank’s Monetary Policy Committee (MPC) said inflation will now peak at 13.3 per cent in the final three months of this year as average energy bills treble from £1,200 in 2021 to £3,500 by October.

The economy is now forecast to shrink in five consecutive quarters for the first time since the global financial crash of 2008. The inflation forecast was up sharply from the 9.4 per cent predicted just three months ago, with prices now on track to continue rising rapidly throughout 2023. It means the cost of living crisis will continue throughout next year and only begin to ease in 2024, according to the Bank’s latest forecasts. Real household incomes are expected to decline by around 5 per cent, on average, over two years – the deepest fall since records began in 1960.