UK GDP fell by much more than the median expectation in the final quarter of 2008. GDP fell 1.5% against a median expectation of 1.2% from a broad range of economists’ forecasts. Britain is now officially in recession (two successive quarters of negative GDP growth). It only narrowly missed entering recession at the end of Q3 2008 beacuse GDP was measured as flat for Q2. This is the sharpest decline since the 1980 recession which was the deepest since the 1930s depression

Sterling , governments bonds and equities all fell as the general consensus is that the UK will be the weakest of all the major economies. Several leading economists and strategists are calling Britain bust and advising investors to sell all UK assets and look to the emerging economies particularly China as home for their investments.

The UK housing bubble which was inflated to bursting point by the Bank of England’s monetary policy (control of interest rates handed to them from an elected government by Brown) plus the high levels of debt and the free and easy regulatory financial regime (again Brown’s making) have created a banking crisis not seen in Britain’s history with all the major banks but HSBC technically standing on the edge of bankruptcy.

Even conservative think tanks are predicting unemployment levels of 3.4 million which in reality is over 4m. Companies are going bankrupt at a rapid rate as credit and orders dry up. All this is feeding backing into the Banking and financial system increasing the losses. It is a dynamic that the government cannot stop and opens them to huge liabilities which may take the UK to the edge of bankruptcy, forcing them to go to the International Monetary Fund (IMF) for a crisis loan. The IMF will impose strict conditions on any such loan which likely to include a freeze on pay rises and a large reduction in in public services.

Yes welcome to Brown’s economic miracle!