Page last updated at 11:38 GMT, Friday, 23 January 2009

UK recession 'may last two years'

Professor Nouriel Roubini warned of difficult times ahead for the UK

The UK's recession will last between one and a half and two years, a leading economist has warned.

That is the estimate of Nouriel Roubini, professor of economics at New York University, and one of the few people to predict the credit crunch.

The problems facing the UK economy are "pretty severe" and "will take quite a while to resolve", he told the BBC's Today programme.

Yet he said things were manageable, and the UK could afford the banks bail-out.

Mr Roubini's comments came before official data confirmed that the UK is now in recession after two consecutive quarters of falling economic output.


The government spent more than 37bn last autumn in a rescue deal for Royal Bank of Scotland, Lloyds TSB and HBOS.

The pound might be falling slowly, slowly over time, but the risk of total crash is still limited
Nouriel Roubini

And earlier this week it announced a new government insurance scheme for the whole banking sector, that may also prove expensive for taxpayers.

"The public debt of the UK relative to its GDP is relatively small even if the final deal of bailing out the banks is significant and large," said Mr Roubini.

He added that it was wrong to compare the UK with Iceland, which due to its small population size, was struggling to pay for its own banking rescue plans.

Mr Roubini said that the UK was more like the US, and therefore able to afford the final bill for rescuing the banking sector.

Turning his attention to the recent falls in the value of the pound, Mr Roubini said some decline was inevitable, as sterling had previously been overvalued.

"The pound might be falling slowly, slowly over time, but the risk of total crash is still limited," he said.

"The problem should be manageable with the right policies... and [in the meantime] the weak pound is a good way of stimulating exports."

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