The leading Bank of England official who accurately predicted the recession warns today against complacency that the worst of the slump is over and predicts a further surge of more than a million in unemployment this year.

David Blanchflower, who steps down from the Bank’s rate-setting Monetary Policy Committee this week, says that the recovery predicted by the Chancellor for the end of this year may not materialise, and is likely to prove lacklustre if it does.

Challenging growing optimism over prospects for economic revival, he says in an exclusive interview with The Times: “My worry is that there can be many false dawns and we shouldn’t just assume that everything is over.”

He casts doubts over predictions by Alistair Darling, and by the Bank, for the economy to return to growth of more than 1 per cent next year. “I think it’s pretty hard to see anything very strong for 2010,” he says. He also foresees a continuing, heavy toll of job cuts, driving numbers out of work above three million by next year.

“We are going to see increases in unemployment averaging at least 100,000 certainly for the next 12 months,” he says. “That doesn’t look like much signs of hope to me.”

Professor Blanchflower says that he does expect recovery but cautions against persistent risks including a failure by banks to restart normal lending. He fears that it is too soon to rule out the calamity of a Depression. “I don’t think we can rule it out.”

As concerns grow that the economy could recover only to suffer a relapse into a “double-dip” or W-shaped downturn, the outgoing external MPC member says he believes that a weak V-shaped rebound is more likely but cannot be taken as guaranteed.

“It could be W-shaped, it could be L-shaped – all those things are possibilities. My money would be on some kind of V, if you take a V where the ‘down’ is steeper than the ‘up’ – so slower progress.”

The professor also expresses concern over where in the economy new growth and jobs will come from once the recession is over. “It’s not going to be in the areas that it has been in the past,” he says. “It’s obviously not going to be in the financial sector, not going to come in self-employment, probably not going to come in the public sector. So where is the great burst of growth going to come from? It’s extremely difficult to know.”

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