The UK economy will not begin to grow again until the middle of next year predicted the Bank of England's latest quarterly inflation report.

In the meantime, it said economic growth, at its lowest point, will decline by 4.5 per cent and the recovery will not start until the end of this year.

According to Bank of England Governor Mervyn King the economy requires a period of healing.

While he admitted there were three solid reasons to believe that economic activity would rebound in the short term - monetary and fiscal stimulus to the economy, the substantial depreciation of sterling and a stock cycle that should soon turn - there were also reasons to believe a solid recovery would take considerably more time.

"This recession is different in nature from earlier downturns in the post-war period,"Mr King said.

"The financial crisis lowered asset prices and revealed the extent of leverage on balance sheets. Correcting those imbalances will require significant and persistent changes in the flow of spending and, in the banking sector, actions to reduce leverage and raise capital.

"As a result, although the measures taken by governments to stabilise their banking systems have been truly extraordinary in scale and scope, it is likely that the supply of credit will continue to be restricted for some while, with banks being risk averse and aiming to raise capital ratios.

"Some of the past build up of debt in the private sector has in effect been taken into the public sector."

Mr King added that while some surveys showed promising signs that the pace of decline in activity had moderated, "they do not tell us how strong and persistent any such recovery will prove to be, precisely because of the uncertainty surrounding the way in which balance sheets will evolve".