Chancellor warns recession is far from over

| January 7, 2009 | 0 Comments
Chancellor warns recession is far from over

Chancellor of the Exchequer Alistair Darling has admitted that 2009 will be a difficult year because the UK is far from through the recession.

In an interview with the Financial Times, Mr Darling updated an earlier prediction that the downturn would run its course by the middle of the year.

He said the forecast was based on evidence available at the time but more recent economic data indicate that it was over optimistic.

On the question of the UK banking sector, the chancellor did not rule out a second injection of taxpayer cash.

So far, Royal Bank of Scotland and HBOS / Lloyds TSB have benefited from £37 billion in recapitalisation assistance, under measures announced in October.

At the time, Mr Darling said extreme times called for extreme measures and that he was prepared to make even more money available if necessary.

The problems of the UK banking sector are far from over; last week, the Bank of England published its credit conditions survey, which revealed that lending is still severely restricted and likely to remain so in the first quarter of 2009.

While some analysts are predicting that further Government intervention will be needed to restore confidence and persuade banks to lend to one another again, such a move would be a serious admission of failure for the Government.

A second bail out could involve the Government buying up toxic assets, as has been seen in the US, and providing guarantees for new mortgage lending.

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