Britain may be facing "arguably the worst" economic downturn in 60 years, Chancellor Alistair Darling told The Guardian newspaper.
Offering the government's gravest assessment of the U.K.'s economy, Chancellor Darling said he had no idea how serious the credit crunch could become there.
"We are facing a profound economic downturn along with every other country in the world," Darling told the newspaper.
His comments followed a warning from a Bank of England policymaker that 2 million people could be out of work by Christmas.
Darling insisted that the U.K. economy was facing "unique pressures" from the combined effects of the credit crunch and hike in oil and food prices.
"I think it's going to be more profound and long-lasting than people thought."
Noted financial guru Nick Parsons agrees with Darling's assessment. He says that the U.K. economy is the worst seen by investors in a generation.
"For anyone under the age of 40, trading in financial markets around the world has never seen anything like this," Parsons told MarketWatch.
Parsons, head of market strategy at NAB Capital Markets, London, detailed the dreadful predicament of U.K. and European economies. But as dire as the news is, he believes most of the bad news is behind Europe.
"Our forecast is that we're looking to trade (the pound) 5 or 6 cents lower than current levels," said Parsons.
"Most of the decline is behind us. The euro is up. We don't see that going a great deal further. The problems in the U.K. economy are being replicated across Euroland."
Parsons reckons that interest rates are going to be on hold for the next three months. "CPI has come down. The ECB's focus will be on the quantity of money, managing liquidity, rather than giving a boost to consumers by lowering interest rates," he said.
Parsons estimates the peak of inflation will be in October. Then, by the early part of next year, we will see the Bank of England easing interest rates.
Last week, the BofE voted to keep rates steady at 5 percent for a fifth month running with expectations rising that recession worries could prompt a cut before the end the year.
What worries Parsons is the growing government debt in the U.K., due to declining tax revenues.
"Public finances are going to deteriorate very sharply. During the last recession, public finances were in surplus. Today we are already in deficit, and it is possible to look at a £100 million pound borrowing requirement next year," said Parsons.
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