The UK government and the Bank of England have today issued a statement confirming that the UK economy is in fact in a recovery phase but vitally they have both agreed that the ongoing stimulus package needs to remain for the foreseeable future. This is something of a bitter blow to analysts who believed that the UK economy was over the worst and in fact well positioned to withstand a withdrawal of the quantitative easing program.

This particular strategy is a reflection of Mervyn King's recent comments when he warned of overconfidence with regards to a recovery in the UK economy and in particular suggested that 2010 may be a difficult year for the UK economy and UK investment markets. All eyes are on the UK property market which after showing signs of recovery has stagnated somewhat in many areas of the country despite the fact that London property prices are back to pre-credit crunch levels.

The UK government and the Bank of England are in a very difficult position because if they withdraw the stimulus package too early there's a chance the UK economy will slip back into recession and if they maintain it for too long they will increase the cost of this very expensive strategy.

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