Recession is likely to become official in Britain next week when data is expected to show that the economy contracted for a second straight quarter in the final three months of 2008. Heralding the grim news, the London Stock Exchange lost 6.78 percent over the past week to end the session Friday at 4,147.06 points.
"We strongly suspect that 'green shoots of recovery' are going to be conspicuous by their absence," said Howard Archer, chief European economist at Global Insight. "Indeed, the data seem certain to show that the UK entered recession with a bang in the fourth quarter of 2008 and is starting off 2009 dismally."
After posting zero growth in the second quarter and negative growth of 0.6 percent in the third, the British economy, according to analysts, is likely to show a contraction of 1.3 percent in the fourth quarter and 1.5 percent for all of 2008.
Archer said the Bank of England, under the circumstances, was likely to cut its benchmark interest rate by another half a point in February, bringing it down to 1.00 percent. "Further out we see interest rates coming down to a low of 0.25-0.50 percent in the second quarter," Archer said.
"Indeed, it is very possible that they could come all the way down to zero."
The Bank on Wednesday will publish minutes from its last rate-setting meeting, where a further reduction was approved. The Bank since October has approved four rate cuts, reducing benchmark borrowing costs from 5.0 percent to 1.5 percent.
The week ahead will also see the release of data on December inflation, expected to show a decline of 0.8 percent from November.
Unemployment figures for the three months to November should meanwhile reveal an increase in the jobless rate to 6.1 percent.
Among companies reporting results next week are the media group Pearson, Anglo-Australian mining giant BHP Billiton and the London Stock Exchange.
Banks will remain under tight scrutiny in the face of rumours of capital increases in some cases as well as a new government re-capitalisation scheme.