Pessimism stalks UK's economy

The economy has been hit hard by the global credit squeeze that began with the collapse of the US mortgage market.

uk flag 88 (photo credit: )
uk flag 88
(photo credit: )
The bad news on the British economy piled up further Monday as one report found that the country's services sector slowed sharply at the end of 2007 and another survey revealed that companies are at their most pessimistic in five years. Retail stocks were also hit amid fears that grocer J Sainsbury and department store Marks & Spencer may report weak Christmas trading figures later this week. Economists expect the Bank of England to be closely watching Tuesday's release of December sales figures by the British Retail Consortium, coming just days before the bank's next interest rate decision on Thursday. Most analysts expect that decision to be a close call as the central bank weighs up signs of a slowing economy against persistent inflation, after last month's decision to cut rates by a quarter of a percentage point to 5.5 percent last month from a six-year high of 5.75%. Aiding the case for a cut, the Confederation of British Industry said Monday that business volumes at financial services firms fell at their fastest rate in almost 17 years during the last three months of 2007. The fall marked the end of a two-year run of growth. Some 44% of companies in the sector, which includes banks and insurance firms, said business volumes had fallen during the quarter. Only 10% reported a rise. In a separate survey of 200 companies, Lloyds TSB found that just over half were pessimistic about the economy, with only one in three expressing confidence. Britain's economy has been hit hard by the worldwide credit squeeze that was sparked by the collapse of the US subprime mortgage market.