'Credit crunch has knocked 14% off British economy'

A member of the Bank of England's monetary policy committee, David Miles, has explained in stark terms just how significant the difference between the economy before 2008 and the economy now really is.

It might sound extraordinary, but the economy is a full 14% smaller than it might have been if things hadn't gone so wrong. He said:

A wide gap has emerged between GDP and where it might have been in the absence of the crisis ... GDP now would have been about 10% higher than in 2008, and not 4% lower.

This is considerably larger than the gap that had opened in the UK four years into the Depression of the 1930s.

And the slide back by 0.1% further in today's GDP figures suggests this double dip may not be the shallow "technical" recession that would be over soon - an "accident of the maths" as some described it and hoped.

Mervyn King, Bank of England governor Credit: REUTERS/Giampiero Sposito

Mervyn King, the Governor of the Bank of England, suggested the next part of the year's figures would already be knocked off course by as much as 0.5%, which could mean three quarters of the economy shrinking - a pattern that is becoming harder and harder to escape.

But Mr Miles pointing out the gap between how the economy had been ticking along before the first signs of the credit crunch and recession that followed brings home the full extent of the damage.