U.K. Prime Minister Acknowledges Tough Year Ahead

By Jennifer Yousfi
Managing Editor

British Prime Minister Gordon Brown used his New Year's address to offer a painfully honest appraisal of the United Kingdom's economic prospects for 2008. And as a former Chancellor of the Exchequer [equivalent to the United States' Secretary of the Treasury] for 10 years under Tony Blair, Brown knows what he's talking about.

"The global credit problem that started in America is now the most immediate challenge for every economy and addressing it the most immediate priority," Brown said. "I promise to take no risks with stability."

The United Kingdom's problems have mirrored the United States, as both countries have suffered a decline in housing prices and financial institutions in crisis. 

England-based residential lender Northern Rock PLC (PINK:NHRKF) ran into trouble due to subprime mortgage-backed securities resulting in large write-downs and a new CEO.  Northern Rock has had to borrow $49.6 million from the Bank of England and now Barron's reports the government might be looking at nationalizing the ailing lender.

The opposition Conservative Party has been vocal in its disapproval of the handling of the economy by Brown's Labour Party. Labour's popularity in the polls has slipped in recent months as the British economy shows signs of waning after a decade of strong growth. The housing recession, coupled with tighter lending standards have lead to an economic slowdown, and some fear the country is heading for its first recession since 1992.

But also as in the United States, the United Kingdom holds out the same hopes: Low unemployment and consumer spending will help the country weather the financial storm.

"Our strong economy is the foundation," Brown added. "In 2008, we will steer a course of stability through global financial turbulence."

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