Bank of England governor Mervyn King today echoed concerns over the UK's economy recovery, warning that a stagflation scenario of high inflation and low growth remains a possibility.

In testimony to the Treasury Select Committee of MPs, King said, while "encouraging,", too much should not read in to the much stronger than expected second quarter GDP data.

"The wider economic problems around the world underline the fact that we cannot be confident that the recovery in demand, output and employment here in the UK will be sustained," he said.

King added that inflation was also likely to remain above the target rate of 2% for another year, at least, especially with a rise in VAT to 20% on the way.

"CPI inflation is currently above the target at 3.2% and it's been high for much of the past four years. Given the changes to VAT announced in the budget, it's likely that inflation will remain above target for much of next year," he said.

Earlier today, economic think-tank NIESR also warned that government spending cuts and disappointing net trade figures will restrict growth in the UK economy to 1.3% this year.

Britain will also lag the global economy which is expected to expand by 5% in 2010, driven by the Far East.

UK gross domestic product (GDP) grew by 1.1% during the three months to 30 June, the Office for National Statistics (ONS) said last week, the strongest growth since the first quarter of 2006. But,like the BoE governor, NIESR doesn't believe that kind of pace will last.

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