Growth has resumed in the UK economy but any recovery was likely to be “slow and protracted”, Mervyn King, governor of the Bank of England, said yesterday, suggesting interest rates would remain extremely low for some time.

The yields on short-term government bonds tumbled on his comments, reflecting the Bank's restatement of its pessimistic economic views, with the yield on two-year gilts falling to a record low of 0.74 per cent. Sterling also fell sharply, falling by 1.2 per cent against the currencies of Britain's main trading partners and to its lowest level for three months.

The implication of the Bank governor's words was that although the economic outlook has brightened since he last spoke on the economy in August, the Bank is still a long way from reigning back its programme of quantitative easing or of raising interest rates.