The UK 's own Icelandic crisis

22 October 2008 By Ian Campbell

The Bank of England s governor emphasized on Tuesday that the UK s banks and economy relied on capital inflows which have dried up. Like an emerging economy in crisis, Britons face austerity. Rate cuts and a plummeting pound are King s lifeboats.

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In a speech on Tuesday evening, Mervyn King, Governor of the Bank of England, warned that the UK economy was entering a recession. He said the economic outlook had deteriorated quickly because the banking crisis had dealt a severe blow to the availability of credit. Growth in secured lending to households had fallen, King said, to its lowest level in more than a decade.

King said that the balance of risks to inflation in the medium term had shifted decisively to the downside. The plan to recapitalise the banking system in the UK and elsewhere would, however, he believed, come to be seen as the moment in which we turned the corner.

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