Recession Will Hit UK Hardest Of All In Europe – EU

Banks warned that they would not pass on all rate cuts from the upcoming Bank of England Monetary policy Committee. On top of that, the EU said that the UK would be hardest hit of all EU economies as the crisis deepens and the IMF looks set to need further cash for bailouts of emerging economies.

This was a severe blow to Gordon Browns attempts to paint himself as the man to lead Britain through the crisis.

David Hodgson, chief operating officer at HSBC said that he expected some stickiness in rate reductions as the expected bank of England rate cut comes on Thursday. “Clearly if interest rates are down significantly, the rates for borrowing will go down. But I am not going to say it is absolutely linear, because it depends on the particular [situation] and the risk.”

“We will do our best but I will not give a categorical commitment that they will come down.

“We would listen. We are in a very, very turbulent position and it’s very hard to predict what markets will do.”

This is a clear indication that lending standards are continuing to tighten as banks seek to strengthen their own positions.

This stance by a major banker shows just how much influence the prime minister really has over the banks…very little. Gordon Brown official spokesperson said that if the official rates fell, customers and small businesses could expect to see the full benefit of such a cut.

Clearly, the bankers have other ideas. Last month, only half the banks passed on the full 0.5% rate cut in their standard variable rates. Moneyfacts, the financial website said that the 82% of lenders had not passed 100% of the last 3 rate cuts.

The EU commission painted a bleak outlook for Britain over the next several quarters with unemployment rising to 7.1% or 2.25m, a contraction in GDP growth of 1% in 2009 and anaemic growth of only 0.4% in 2010.

The EU also said that it expected the government’s borrowing and the budget deficit to surge. Fasten your seat belts….because it’s going to be a bumpy ride.

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Tags: UK hard recession, Uk in recession, UK Recession