Recession in Britain should not be severe says Turner

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Lord Turner, the incoming chairman of the Financial Services Authority, said the UK was suffering from "mild" stagflation - rising inflation combined with an economic slowdown. But he doubts if a recession would be "as severe" as in the Eighties or Nineties.

Following bad news this week on house prices, job losses and share falls, former CBI chief Lord Turner, who takes up his FSA job in September, told the Standard he believes a recession here is a "possibility".

"We have already seen a fall in house prices. I think everybody accepts it's very unlikely that there is going to be some sudden reverse to that and they may go on down somewhat further," he added. "High food and fuel and commodity prices are reducing people's real income which is therefore feeding through to lower volumes of expenditure in the shops.

"The thing which makes it possible that nevertheless this is not as severe a recession as the early Eighties or early Nineties is that we don't have that underlay of high inflation and of inflexible labour markets."

He said: "I can see some reason for not being utterly gloomy."