At a CBI meeting in Leeds the governor told business leaders that house prices will continue to fall and that economic hardship will last for several years.
He said: “Indeed, it now seems likely that the UK economy is entering a recession.”
Mr King said that the failure of Lehman Brothers on 15 September had triggered an extraordinary sequence of events culminating in the recapitalisation of the banking system.
He added: “In the UK unemployment continues to rise and over the past three months, has risen at the fasted rate for seventeen years, albeit from a relatively low level.
“House prices declined by about 5 per cent in the third quarter and are 13 per cent lower than a year ago.
“The recent weakness of the housing market is likely to continue. And if the news on the domestic front were not sufficiently discouraging, the rest of the world economy also appears to be slowing rapidly.”
Mr King is the first economic policy maker in the UK to warn of such a recession – defined as two consecutive quarters of negative growth.
According to Mr King the UK banking system came closer to collapse earlier this month than at any time since the start of the First World War.