Credit squeeze will hit the UK economy

Friday, October 5, 2007

The credit crunch will no doubt have an effect on the UK economy and the Chancellor looks set to down-grade his growth forecasts for 2008.

The Chancellor is expected to down-grade his 2.5% to 3% growth forecast for 2008 in the pre budget report next Tuesday.

It is less than 2 months since the current situation occurred and therefore looking forward it would be prudent to be cautious.

It would be fair to say that the US sub-prime lending turmoil and resultant credit tightening would affect all Western economies. The importance of the US economy and the effect on the availability of credit in the UK would confirm this.

Lenders are expected to be more cautious because of the credit squeeze which could impact the housing market. Analysts are now expecting 2008 GDP growth at 2.2%.