Britain faces a material risk of a recession as many areas of the economy are still constrained by a lack of credit, Bank of England policymaker Ben Broadbent said in an interview published on Tuesday.
Clearly things have slowed a lot since earlier this year and there is a material chance of a technical recession, Broadbent told the Evening Standard according to a version of the interview on the paper's website.
Like his eight fellow policymakers, Broadbent voted in October to increase the Bank's asset purchases by 75 billion pounds to 275 billion as weak consumer demand and the raging euro crisis hit Britain.
Broadbent said consumers' situation looked set to improve next year.
We would be wrong to paint only a gloomy picture, he said.
We have had a couple of really big hits to household income over the last two years... Between them VAT (the increase in value-added tax) and commodity prices might have taken 2.5 percent out of household incomes, and we're not going to have those again.
Broadbent added that the government was addressing a key problem with its credit easing plans announced last month.
It's true that broadly there are many areas of the economy still constrained by lack of credit supply... and that by and large the banks have been under pressure themselves, he said.
If by allowing them to fund some of that lending more cheaply you can encourage the banks to increase the supply of that credit, then that is a good thing.
(Reporting by Sven Egenter)