UK economy at 3 year low

Following the financial turmoil that has surrounded UK banks, coupled with faltering house prices and reduced consumer spending the UK economy has grown at its slowest pace for three years.

Last year the economy grew by 2.5 percent, and the Office for National Statistics revealed that in the first quarter the Gross domestic product rose 0.4 percent, against the lowest since 2005.

According to Nick Bate, an economist at Merrill Lynch & Co, although the UK is not in recession the economy is slows and that the threat of inflation is high and that outlook will likely to result in further cuts in interest rates by the BoE.

Financial services in particular have suffered causing a five year low, hardest hit were Royal Bank of Scotland Group Plc and HSBC, although UK banks in totality had writedowns in the region of $309 billion.

The BoE has cut interest rates three times and has proved emergency action in order to sustain the liquidity in the UK banking system in order to ease the strain on the mortgage market and stabilize property values.

The International Monetary Fund now predicts the economy will expand just 1.6 percent this year through to 2009 which is the lowest since the recession of 1992.

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