Economy "lagging behind" as debts mount

The UK economy is facing tough times over the months to come as deficits increase.

According to new analysis from Caxton FX, Britain is ’lagging behind’ other countries as the government faces the high costs of the credit crunch.

Official forecasts suggest that £175 billion will be added to the deficit in the public finances this year - and that the nation’s net debt will increase from 40 to 80 per cent of GDP over the years to come.

Meanwhile, Caxton FX suggested that the total cost of interventions in the financial services sector, one of the parts of the economy hit hardest by the crisis, could have reached £1.5 trillion.

The forex specialists said that these financial burdens would also lead to further downwards pressure on the pound.

Sterling has dropped from $1.70 to $1.64 against the dollar and from €1.18 to €1.16 against the euro in August.

Duncan Higgins, senior analyst at Caxton FX, commented: ’The UK has spent far more in this recession bailing out the banks - an estimated £1.5 trillion.

’This rising deficit has repelled both consumer and investor confidence and prevented Britain from achieving similar rates of recovery.’ADNFCR-2318-ID-19317919-ADNFCR