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Moody's believes further substantial financial losses to follow

Credit ratings agency Moody's believes that while the UK government should maintain the Triple-A rating for UK government debt there may be further movement on the ratings of some UK banks and building societies. While in total the UK financial sector has taken a hit to the tune of £110 billion since the recession began, Moody's believes there is a further £130 billion to come over the next few years. To put this into context, the UK financial sector could in the end have lost around £240 billion during the worst recession in living history.

While many bank shares and financial shares have picked up over the last few weeks there is some concern in many areas that future changes in credit ratings could have a significant impact on share prices. There is also concern that some investors appear to be taking a blue sky view of the UK economy and the UK financial sector in particular when, if Moody's is correct, more than half of all losses have yet to be crystallised.

This is perhaps the main reason why some observers believe the UK economy could be in for a "double dip" style cycle, something which would be very difficult to avoid if the forecast financial sector losses are anywhere near the amount mentioned.

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