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Wednesday, 22 October 2008

Britain likely to face recession, says Gordon Brown

Gordon Brown today admitted the global economic downturn was "likely to cause recession" in the UK as he ordered a halt on home repossessions.
During a raucous Commons question time dominated by the state of the British economy, the prime minister finally conceded that the economy is expected to go into decline.
Brown has previously avoided using word "recession" for fear of exacerbating the problem but following a speech from Mervyn King last night, the prime minister said he concurred with the governor of the Bank of England's gloomy assessment.
"The governor of the Bank of England said last night that not since the first world war has the international banking system been so close to collapse, and I agree with him," said Brown.
"Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too.
"That is why we are giving our undivided attention to helping families and businesses."
The prime minister said new guidance would be issued to the judiciary to make it easier for people in financial difficulties to remain in their homes.
"I can announce today new guidance for the judiciary to halt or adjourn court action on repossessions, unless alternative options that help the homeowner, including extending the terms of the mortgage, changing the mortgage type and deferring payment, have been fully examined first of all.
"We are determined to do everything we can to help homeowners avoid repossessions."
Figures released in August showed a surge in possession orders in the second quarter of this year, with lenders threatening 28,658 homeowners with repossession - 24% more than in the same period last year.
Not all of these ended in homeowners losing their properties, but the number of actual repossession has also jumped.
Figures for the first half of the year showed that 18,900 properties were repossessed by lenders, the highest figure for 12 years.
Statistics for the third quarter, set to come out in early November, are expected to show further increases in possession orders and repossessions.
David Cameron, the Conservative leader, accused Brown of having "racked up" debt during the boom years and getting the stewardship of the economy "wrong".
He repeatedly challenged the prime minister to admit that he had not, as he had previously claimed, abolished the "boom and bust" economic cycle.
But Brown sidestepped the question and insisted it was "right" to stimulate economic activity by borrowing in a downturn.
"The reason we can afford to borrow is that we have low national debt," he told MPs.
Brown said he expected later today an announcement of a summit of world leaders to discuss the economic crisis and he would attend on behalf of Britain. (Guardian uk)

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