Crisis sinks pound, rattles Britain

Financial Crisis Posted on

A plunging pound. Surging unemployment. Worries the banking system may collapse and take the country's credit rating with it.

Fears are growing that Britain's economy is falling off a cliff amid the world financial crisis. Growth figures due Friday could show the country in its worst downturn in nearly 30 years, capping a terrible week that saw unemployment figures surge and mounting talk that the country's debt could face a humiliating downgrade.

Official fourth-quarter 2008 figures are sure to confirm a recession, after the economy shrank 0.6 percent in the third quarter. They could be the worst since a 1.8 percent drop in the second quarter of 1980, when the British economy was mired in a deep recession after the new government of Prime Minister Margaret Thatcher raised interest rates to rein in double-digit inflation.

Analysts said Friday's figures will provide a suitable bookend to a wretched week for the British economy. Unemployment figures Wednesday showed a 6.1 percent jobless rate and 1.92 million out of work, the highest since September 1997.

"In terms of U.K. economic news, this past week takes some beating," said Neil Mackinnon, chief economist at ECU Group.

"There are no green shoots of recovery, no light at the end of the tunnel and the GDP figures will be grim and underscore the depth of the recession," he added.

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