Finance News

UK Economic Outlook Has Worsened Due to Eurozone

The outlook for the UK’s economy has got worse over recent weeks due to the Eurozone crisis according to Sir Mervyn King, Governor of the Bank of England.
News about the worsening economic situation came as figures show that the UK’s public sector borrowing has risen much more than expected in May, while there has been a 7.3 per cent fall in income tax receipts.
Sir Mervyn said: “We are in the middle of a deep crisis, with enormous challenges to put our own banking system right and challenges for the rest of the world that they are struggling with,” Mr King told parliament’s Treasury Committee.”
“In the last six weeks… I am very struck by how much has changed since we produced our May Inflation Report.”
“I am pessimistic. I am particularly concerned because over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road.”
The governor of the Bank of England made the statements as public sector net borrowing increased by £17.9billion in May compared to a £15.2billion rise in May 2011. The predicted rise by analysts was just £15.7billion.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “The May public finances make pretty bleak reading for the Chancellor. Only two months into the fiscal year, it is evident that Mr Osborne is facing a major battle to meet his fiscal targets for 2012/13 and is in grave danger of losing it.”
“While expenditure can fluctuate appreciably from month to month, it does suggest that the government is having trouble imposing its spending cuts. And if the spending cuts are yet to bite, the impact of this on the economy is yet to be felt, which is worrying for growth prospects.”
The UK slipped into a second recession and fears of a much longer slump are rising as companies hold back in investment.