Bad economic news hit the government yesterday, a day after the prime minister and the chancellor insisted the economy was fundamentally strong and would 'weather' global financial storms. Financial Times
The credit squeeze has contributed to the worst public finance deficit ever in the first eight months of the financial year and an annual drop in new mortgage lending. It has also choked off growth in money deposited in banks.
The biggest surprise was the Office for National Statistics’ revelation that the current account deficit widened from a revised £13.7bn to a record £20bn in the third quarter, equivalent to 5.7% of gross domestic product, giving Britain the unenviable record of the largest current account deficit in the group of seven leading countries.
The most worrying figure for the government is the sudden and deep deterioration in the public finances, caused in the main by a shortfall of tax revenues. Analysts said the data presented an 'ugly picture' of an unbalanced economy that could be one of the most vulnerable in the G7 to the effects of the credit squeeze.