Britain has become a worse credit risk than McDonald's and a host of other large companies, figures produced for The Independent reveal.
The collapse in Britain's credit rating has taken place over the past two and a half months, since the Government underwrote the banking system and decided to spend its way out of recession.
Investing in UK government debt is now almost twice as risky as buying McDonald's corporate bonds, according to the market in credit default swaps (CDS), which provides insurance for the buyers of such debt.
The government debt of large economies such as the UK would normally be considered far more secure than corporate bonds.
However, on 29 September, the cost of buying insurance against default on UK five-year government debt became more expensive than the equivalent cover for the US burger chain and has since overtaken Kellogg's and Coca-Cola, according to data from Bloomberg.
The cost of insuring British debt soared on that day, as the Government nationalised Bradford & Bingley, increasing fears that the state would have to bail out the banking system.
POLITICIANS MUST PREPARE themselves for the possibility that global economic growth shrinks for the first time since the Second World War, according to the World Bank, reports The Telegraph.
In comments which underline the scale of the international recession, the Washington-based institution said even as things stand growth next year will be the worst since comparable records began in 1970. However, it said the time had come for policymakers to contemplate an even worse outcome.
The warning will be seen as a final blow for those who held out hope that some countries would be insulated from the recession.
It came as Bank of England Monetary Policy Committee member Andrew Sentance acknowledged that the UK is now facing a recession of a similar scale to the three major slumps which have afflicted the UK since 1945.
As the recession spreads far beyond the borders of the United States, both rich and poor countries will suffer a slump of unprecedented scale, the Bank said in its latest review of the world's economic prospects. Global trade, the real engine of wealth generation, will contract for the first time since 1982.
THE GOVERNMENT IS considering major changes to its bank bail-out scheme before Christmas to try to force banks to lend more money to small businesses and homebuyers, according to The Guardian.
Amid concerns that the government's £500bn package of measures is not working, the Treasury is considering a scheme to guarantee a wide range of loans in order to compel banks to channel more cash into businesses and mortgages.
The Conservatives have been advocating a national loans guarantee scheme that the Treasury may be trying to adapt to suit its objective of maintaining funds to small businesses during the economic crisis.
It is possible that strict targets for lending could be set for banks to achieve next year when the recession is expected to drive up unemployment, force businesses to the brink and confront more homeowners with repossession.
Alistair Darling reiterated the point to reporters at Westminster yesterday. "One of the biggest challenges we face in the next few weeks is to ensure that having recapitalised the banks, the banks can also support the wider economy," the chancellor said.
STERLING HIT A RECORD low against a basket of currencies today after the pound sank to new lows against the euro overnight, weighed by a grim outlook for the UK economy and the prospect of more rate cuts, says The Telegraph.
Trade-weighted sterling was at 79.7, Bank of England data showed. It was the lowest on a daily basis on BoE data going back to 1990.
"Sterling is generally being weighed down by the gloomy prospect for the economy," said Chris Gothard, currency analyst at Brown Brothers Harriman.
"We have declining interest rates and there isn't really anything at the moment to provide a strong reason to buy," he added.
Earlier, sterling hit a record low against the euro of 87.73p.
Contact: John Bakie, Tel: 020 7484 9805, e-mail: [email protected]
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