[OPE-L] Black hole in Britain

From: glevy@PRATT.EDU
Date: Fri Dec 21 2007 - 13:16:47 EST

Black hole in Britain's public finances deepens

[by]  Angela Balakrishnan

Unlimited, Thursday December 20 2007

black hole in Britain's public finances deepened today after
official figures showed the current account gap hit a record high,
 the credit crunch knocked tax receipts from the City.

Separate figures also revealed the first year-on-year
fall on
mortgage lending in more than two years, as the housing
continued to slow.

In the three
months to September, the current account gap leapt to
high of £20bn, equivalent to 5.7% of UK growth, the Office
for National Statistics said. Deficits from previous quarters
 upwardly revised as well.

sharp deterioration was mainly driven by a weak contribution from
financial services. The City has fuelled a large part of
economic growth in recent years, helping to plug the
hole in public
finances. However, the global credit crunch has
seen many firms write
off huge losses in recent months.

An increasing deficit in the UK's trade in goods also
contributed to the hefty rise.

Public sector net
borrowing also soared to a record high of £11.208bn
November, as government spending outstripped receipts. Economists
warned that the figure is now likely to overshoot chancellor
Darling's forecasts by at least £5bn this

The huge jump in the current account
deficit will put further
 pressure on the pound, with analysts
saying Britain's trade position
is now as dire as that in the
United States.

Meanwhile, separate data from the
ONS showed that economic growth in
the third quarter of this
year was unrevised at 0.7%, but the annual
rate ticked up to
3.3% from 3.2% because of changes to last year's

However, a breakdown revealed strains beneath the
solid headline
numbers. While consumer spending rose by 1.1% in
the third quarter -
 the fastest rate for over a year, the
saving ratio fell to 3.4% from

Growth in Britain's dominant service sector slipped down slightly

Analysts said the policymakers
would be concerned about risks to
 growth in the coming months
as the turmoil in financial markets and
tightening credit
conditions take hold.

New figures today from the
Council of Mortgage lenders showed that
this was continuing to
feed the downturn in the housing market.
Mortgage lending saw
the first year-on-year fall for more than two
years as lending
last month dropped 8% to £30.7bn. Michael Coogan,
director general said he expected the trend to continue into next
year and called for more support from central banks to help
 liquidity in the money markets.

Analysts said that today's data presented a bleak outlook for
the  economy.

"This morning's
flurry of UK data paints a worrying picture of a
unbalanced economy," said Jonathan Loynes at Capital

Economics. "Overall, a pretty ugly picture, supporting our view
 the coming economic slowdown will be a prolonged period
of adjustment
rather than a short pause for breath like that
seen in 2005."

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