Short sharp recession? Not on the evidence. We are now in the grip of a global deleveraging which will be severe, unsparing and prolonged.

Short sharp recession? Not on the evidence. We are now in the grip of a global deleveraging which will be severe, unsparing and prolonged. Interest rate cuts may alleviate some of the pain. The reason that the UK economy is especially vulnerable is, first, that it entered this crisis with high levels of both household and government borrowing, and second because of the structure of the economy itself. Financial services, which formed the fastest-growing sector of the economy overall in recent years, is facing a severe contraction. Retail, business services, property, construction and housebuilding are all now being hit hard. That leaves manufacturing, but we have little of that left after the two previous recessions. We will now see rebalancing – with a vengeance.