Bank of England Indicates Britain Headed into Recession

The governor of the Bank of England stated yesterday that “It’s bound to be the case that there is the possibility of a quarter or two of negative growth”. That would qualify as a recession, though that word is not used. Following on Japan’s release of numbers which showed contraction in their economy, it is clear that commodity and energy prices are taking effect worldwide. In the UK, headline inflation is expected to come in more than twice as high as the 2% target rate, and the latest unemployment numbers reveal six successive months of rising unemployment.

Compounding economic declines with the credit crunch, it is clear that banks are unlikely in a position to relax the strict underwriting practices which have replaced the easy money environment of two years ago. The less visibility that banks and lenders have, the more pressure it puts on commercial real estate since during these times loans will come due and will need to be refinanced. The tough lending environment may result in the need for owners needing to kick in additional equity, which if unavailable, could lead finally lead to the distress sales in commercial real estate so many are eagerly waiting for.

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