The economic crisis may have had a greater impact on the UK's ability to supply goods and services than previously thought, according to the Bank of England.
In its quarterly bulletin the bank revealed the damage to the nation's supply chain may be more severe than anyone imagined and that is having knock-on effects for Britain's inflation rate, the Financial Times reports.
At present many economists are suggesting rises in value added tax and oil prices as the key reasons for high inflation, but a more fundamental question is how much spare capacity actually exists.
Officials at the Bank of England have previously said disused factories and the subsequent loss of jobs has led to an excess of spare capacity, which in turn explains their prediction that inflation will fall below its medium-term target of two per cent.
However, the FT explains new developments have led them to reconsider: "With the consumer price index at more than three per cent for the past few months, economists wonder whether more spare capacity has been taken out of the economy than is easily visible."
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