Pounds Falls Further

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Yellow Belt
Pound falls as CBI warns borrowing will have to rise by another £100bn.

The pound weakened on Monday morning after business leaders warned Alistair Darling will have to take on another £100 billion in debt, requiring tax rises that risk depressing the economy for years.

Sterling fell more than two cents against the dollar to $1.4220 when the market opened in London, following the warning from the CBI, Britain's biggest business lobby. The pound also weakened against the euro, to €1.1153.

The CBI is predicting a further severe deterioration in public finances amid a deep recession in which the UK economy will shrink by 3.3pc and unemployment will pass 3 million.

In his pre-Budget report last year, the Chancellor set out plans to borrow an extra £500bn over five years, taking the national debt above £1 trillion for the first time. Mr Darling had planned to borrow £78bn this year and £118bn in 2009/10 before falling to £105bn the year after.

Those figures had already broken all previous borrowing records, but the CBI predicts even larger deficits.

The Treasury will have to borrow £88.7bn this year followed by £148.7bn in 2009/10 and £168.1bn the following year, it claims. That final figure is the equivalent of nearly 12 per cent of gross domestic product, a figure without precedent in recent economic history.

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