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Mervyn King warns of sharpest economic slowdown for 30 years

Mervyn King, the Governor of the Bank of England, has stepped forward with this most downbeat statement for sometime. He is suggesting that the UK will experience a downturn the like of which has not been seen for over 30 years having pinpointed the collapse in the banking system as the main culprit. This is by far and away the most serious and depressing report from the Bank of England for many years and one which is sure to be recognised by the investment market.

It looks as though the rescue package which was announced only a couple of weeks ago will take some time to filter through the system and the short-term impact could be minimal. Longer term the UK is well positioned for future growth although with national debts of over £500 billion there will need to be an increase in tax rates in due course.

It will be interesting to see how the UK government responds to this report from the Bank of England as there appears to be a widening gap between the two parties on the immediate direction of the country. There is also a suggestion that interest rates will "fall as far as they need to".

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