UK has become Europe’s poor relation

If the UK public needed any further proof that the recklessness driven by greed of the people that they trusted to run their banking system had driven their country to the verge of bankruptcy lies in the discoveries in a recent report that Great Britain, once the jewel in the crown of European commerce, now holds the highest percentage of toxic assets of financially distressed companies in all of western Europe.

In the days of the financial boom, and even before- hand , the British economy was substantially influenced by its financial sector, which made a tremendous contribution to growth in the United Kingdom. The British Chancellor of the Exchequer, Alistair Darling, was heard to say on more than one occasion that “London has risen to the challenge of the global economy and has become the world’s leading financial centre.”

In those halcyon days before the collapse of the financial system, London was indeed the Camelot of the European financial system , home to the highly influential London Stock Exchange, as well as the cream of the UK’s most important banks such as Barclays, Lloyds, the Royal Bank of Scotland Group and HSBC as well as several hundred international banks.

As the extent of the financial collapse began to hit home, it has come to light that the UK banks now currently hold just under a quarter of all the distressed assets in Europe. In terms of percentages, the UK banks were holding as security 24 percent of the assets all distressed companies in 2009, while Germany has 14 per cent, Italy 12 per cent and France just 6 per cent.

Those in the know were not surprised to discover the extent of the UK’s banks coverage, given the greater leverage that the British banks rushed to take on during the bubble years of private equity.

The European manufacturing sector has been the worst hit in recent years, with statistics showing that in July 2009, 41 per cent of distressed companies came from this sector manufacturing.

In the last few years, the UK accounted for 34 per cent of leveraged buyout (or LBO), or highly-leveraged transaction (HLT). This recipe for financial disaster for UK banks occurs when the assets of an acquired company are used as collateral for the borrowed capital, sometimes combined with the assets of the acquiring company.

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Tags: Alastair Darling, Alistair Darling, Bank, Bank of England, Banking, bankruptcy, Barclays, British Economy, British Pound, Credit Crunch, Currency, Debt, Economics, Economy, Finance, Financial News, Global Economy, HSBC, Lloyds, London Stock Exchange, Money, Money Management, Money Markets, Recession, Royal Bank of Scotland, Royal Bank of Scotland Group, Stock Markets, Stocks and shares, UK Banks, UK Recession