Britain predicts deeper recession

Thursday, December 10, 2009
LONDON: Britain forecast a far deeper recession than thought on Wednesday, with the economy set to shrink 4.75 per cent this year, while it used a budget statement to also unveil a tax on bankers’ bonuses.

“The task today is to ensure the recovery and promote long-term growth,” Finance minister Alistair Darling told parliament, presenting a mini-budget report, a precursor to the annual 2010/2011 budget due early next year.

The new 2009 forecast marked a big downgrading of the 3.5-per cent contraction given in April. The economy was expected to grow by 1.0-1.5 per cent next year, in line with the previous estimate.

Chancellor of the Exchequer Darling fired a broadside at banks amid mounting public anger over the return of bonuses in the troubled sector, which has been widely blamed for the global financial crisis.

He announced plans for a one-off 50-percent tax on bankers’ bonuses over 25,000 pounds (27,500 euros, 40,100 dollars) in a bid to claw back more than half a billion pounds of state money spent on rescuing ailing lenders.

The nation’s struggling economy has been battered by the global financial crisis and the global downturn, and is currently mired in the longest recession on record, shrinking over the past six quarters.

“While I’m confident that the UK economy is on the road to recovery, we cannot be complacent to cut support now could wreck the recovery and that’s not a risk I’m prepared to take,” Darling told lawmakers. “I have been clear that support during the downturn must go hand in hand with steps to rebuild our fiscal strength,” added Darling.