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Wednesday, 7 October, 1998, 08:02 GMT 09:02 UK
UK economy heading for a 'dramatic slowdown'
Gordon Brown, UK chancellor
Gordon Brown: Admits the UK economy will slow sharply
The UK Chancellor, Gordon Brown, has admitted that the economy is heading for a sharp slowdown.

Economic growth in the UK is set to slow much faster than expected next year as a result of the financial turmoil that has spread throughout the world.

Mr Brown said that growth will "inevitably" be slower than forecast.

The poor figures will increase pressure on the Bank of England to lower its interest rates at the meeting of its Monetary Policy Committee.

Nonetheless the Chancellor declined to call on the Bank of England to cut its interest rates. In an interview with BBC Radio's Today programme he said he would stand by the Bank of England whatever its decision.

The central bank will announce its decision on Thursday noon.

Mr Brown blamed the poor economic figures on the crisis in Asia, which he said had cut UK exports to many of these countries by more than half.

The UK economy is now expected to grow next year by just 1%, half the rate forecast by the government only six months ago.

British exporters have suffered from a slump in orders as Asian countries have plunged into recession and problems have spread to Russia and now Latin America.

Steel furnace
Exporters like British Steel have been hit
At the annual meeting of the International Monetary Fund and the World Bank in Washington, Mr Brown said: "Slower world growth makes it inevitable that growth in Britain next year will be more moderate.

"But as a result of the tough and decisive action this government has taken, Britain is better placed to steer a course of stability in an uncertain and unstable world as we get the British economy back on track for sustained growth."

Maude and Clarke get stuck in

Conservative shadow chancellor Francis Maude said Mr Brown's admission that growth would be lower than expected left a "gaping hole" in the government's spending plans.

He said this is a "downturn made in Downing Street", with the government raising taxes and loading costs onto business while going on a "spending spree".

Former Tory chancellor Kenneth Clarke added his own personal attack during a fringe meeting at the Conservative conference.

He ridiculed the chancellor's key economic promise of "no return to boom and bust".

Mr Clarke said: "You should be so lucky as to get near a boom, Gordon. You are returning us to bust at a very rapid rate.

"Till a fortnight ago you've been telling everyone the big danger is an inflationary boom. That never never was remotely the condition that you actually faced."

Job cuts and falling exports

The slowdown in the UK economy is likely to lead to a large rise in unemployment, with more companies laying off staff.

Mr Brown highlighted drops of about 50% in British exports to Indonesia, Malaysia, South Korea, Thailand and the Philippines as result of the "turmoil" in Asia.

"With the IMF forecasting that growth in world trade will fall by two thirds this year, Britain's exports markets are set to grow much more slowly," Mr Brown said.

The IMF has also predicted that world growth will fall from 3.7% to around 2% next year.

 WATCH/LISTEN
 ON THIS STORY
BBC News
Gordon Brown: "Britain is well prepared"
BBC News
BBC economics correspondent Ed Crooks talks to Gordon Brown
BBC News
Francis Maude: "A downturn made in Downing Street"
BBC News
The BBC's Chris Giles: "This will put even more pressure on the Bank of England to cut interest rates"
BBC News
Ed Crooks: Interest rate cut not a foregone conclusion
BBC News
Shadow chancellor Francis Maude: "Interest rates much higher than they need have been"
BBC News
Gordon Brown: "I stand by the Bank of England in any decision it makes"
See also:

07 Oct 98 | Business
06 Oct 98 | Business
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