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Is this the big one?
It is 15 years since Britain last suffered a recession. But now the housing market is slumping, oil prices are soaring and a credit crisis is paralysing the banking world. Are the conditions right for a 'perfect economic storm'? Larry Elliott reports
Gordon Brown says Britain should brace itself for the impact of global financial turbulence. The Financial Times warns that the outlook for the economy is the worst it's been since the dotcom bubble burst at the beginning of the decade. Retailers fear that the Boxing Day stampede to the sales was the last gasp for the consumer before a prolonged period of belt-tightening.
For once, the politicians, the economic forecasters and the business community are in agreement: 2008 is going to be tough. The only question is how tough. Britain has had 15 years without a whiff of recession; instead there has been a decade and a half of uninterrupted growth, with falling unemployment and rising house prices. Even a modest slowdown in the pace of activity, particularly if accompanied by a stagnant housing market, is likely to come as a shock. There are, however, those who think it could be a lot worse than that. The prime minister is certainly worried, noting in his new year message that the "global credit problem that started in America is now the most immediate challenge for every economy".
But it is not just a credit crunch. Oil prices rose to more than $97 a barrel yesterday. The assassination of Benazir Bhutto has destabilised Pakistan and possibly the wider region; climate change has increased the risk of environmental catastrophe. Little wonder that some are saying we should be battening down the hatches in preparation for the "perfect economic storm".
Gordon Brown says Britain should brace itself for the impact of global financial turbulence. The Financial Times warns that the outlook for the economy is the worst it's been since the dotcom bubble burst at the beginning of the decade. Retailers fear that the Boxing Day stampede to the sales was the last gasp for the consumer before a prolonged period of belt-tightening.
For once, the politicians, the economic forecasters and the business community are in agreement: 2008 is going to be tough. The only question is how tough. Britain has had 15 years without a whiff of recession; instead there has been a decade and a half of uninterrupted growth, with falling unemployment and rising house prices. Even a modest slowdown in the pace of activity, particularly if accompanied by a stagnant housing market, is likely to come as a shock. There are, however, those who think it could be a lot worse than that. The prime minister is certainly worried, noting in his new year message that the "global credit problem that started in America is now the most immediate challenge for every economy".
But it is not just a credit crunch. Oil prices rose to more than $97 a barrel yesterday. The assassination of Benazir Bhutto has destabilised Pakistan and possibly the wider region; climate change has increased the risk of environmental catastrophe. Little wonder that some are saying we should be battening down the hatches in preparation for the "perfect economic storm".
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