British finance minister Alistair Darling hinted he will downgrade his economic growth forecast for the country when he presents his first pre-budget report to parliament, in an interview published Friday.
Speaking to the Financial Times, Chancellor of the Exchequer Darling said that the global credit crunch sparked by concern over American high-risk, or subprime, mortgages would have an impact on the British economy because lenders would become more cautious, which would affect the country's housing market.
"If you look at the consensus of the economic forecasters, it would be prudent to assume that (the credit squeeze) will have some effect on us here," Darling told the business daily.
"If you look across the world - given the importance of the US economy and given what's happened here in relation to the effect it will have on the availability of credit - it would be fairly odd if you didn't take account of that." Darling added that Britain was starting from "a very strong position," and noted he was confident the country's economy would ride out the credit crunch.
Britain was rocked last month when it emerged that Northern Rock, the country's fifth-biggest mortgage lender, had to apply for an emergency loan from the Bank of England because of the global credit squeeze.
The lender's share price plummeted, and customers lined up outside its branches to withdraw their savings, sparking widespread concern over not only Britain's economic prospects but also the strength of the country's financial regulatory regime.
Darling said, however, that he did not think that the current system whereby the Bank of England has responsibility for overall financial stability and the Financial Services Authority oversees individual banks needs drastic reform. He added: "I'm prepared to look at arguments about exactly where the boundaries are."
The chancellor also rejected suggestions by Bank of England Governor Mervyn King that the best solution to the Northern Rock crisis would have been if the Bank could have covertly given assistance to the troubled lender and reported the news later.
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