UK Moves Near Recession as Growth Hits Zero

Economy stagnates, sends dollar soaring against pound
By Jason Farago,  Newser Staff
Posted Aug 22, 2008 9:41 AM CDT
Gordon Brown, the British prime minister, with his chancellor, Alistair Darling. The UK economy has ground to a halt, defying even the pessimists' worst predictions.   (AP Photo/Andrew Stuart, pool)
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(Newser) – The British economy has ground to a halt, according to official figures, ending the longest period of growth in over a century. The nation's statistics office revised its estimate for first-quarter growth from 0.2 percent to zero—the first time it's been flat since 1992—sending the pound falling against the dollar and the euro. "Even in our gloomy scenario for growth, we would have not expected such an abrupt loss of momentum," one investor told the Financial Times.

Sterling dropped almost 1% against the dollar, with one pound now buying less than $1.86. The currency is now at its lowest level in over 11 years—and now that pressure is on the Bank of England to cut rates, it might fall farther still. The bad news is yet another blow for Gordon Brown, whose longstanding reputation for economic competence has been wiped out in recent months.