LONDON, England (AP) — The pound fell to an all-time low against the euro on Monday after Britain’s Treasury chief Alistair Darling said the country was facing the worst economic crisis in 60 years.
Alistair Darling says the UK is facing its worst economic crisis in 60 years.
Darling’s comments over the weekend were underscored by a raft of new economic data — covering everything from house prices and mortgage lending to manufacturing — indicating that Britain is on the brink of a recession.
In morning trading, the euro hit a record high against the pound of 81.40 pence. Around the same time, the pound fell to its lowest level in over two years against the dollar, to just over $1.80.
In data out Monday, a Hometrack Ltd. survey revealed that house prices dropped 5.3 percent in August to £167,000 ($305,000), a year-on-year fall that was the biggest since the research firm launched the index seven years ago.
“A recovery in the housing slump, even back to zero monthly growth, is still some way off,” said Richard Donnell, director of research at Hometrack. Economists at Global Insight are predicting further house price falls of 12 percent in 2009.
Also on Monday, the Bank of England reported that mortgage approvals for home purchases plummeted to a 33,000 in July — the lowest level since records began 15 years ago, and down 71 percent compared to July of last year.
A separate report from the chartered Institute of Purchasing and Supply showed that the manufacturing sector shrank for the fourth consecutive month in August.
Manufacturing is at the front line of the country’s economic woes, as consumers cut spending because of the spiraling costs of food and fuel, falling house prices and fears of rising unemployment. “Ongoing weak manufacturing activity in August heightens belief that the British economy will contract in the third quarter and is well on its way into recession,” said Howard Archer, economist at Global Insight.
Darling told the Guardian newspaper on Saturday that the economic times Britain is facing “are arguably the worst they’ve been in 60 years,” adding that “it’s going to be more profound and long-lasting than people thought.”
The Office for National Statistics revealed last month that economic growth ground to a halt between April and June, ending almost 16 years of continuous expansion.
However, the Bank of England is expected to hold interest rates steady at 5 percent on Thursday, as policy-makers remain torn between delivering a rate cut to help dampen the recession threat or a rate rise to combat high inflation, which is already running at more than double the government’s 2 percent target.