Page last updated at 22:26 GMT, Friday, 19 March 2010

Pound falls against dollar and euro on 'recession risk'

Pound coins
Political uncertainty is weighing on the pound

The pound has fallen sharply against the dollar and the euro after a Bank of England policymaker said the UK could yet fall back into recession.

The pound fell 2.4 cents, or 1.5%, against the dollar, to $1.503. Against the euro, it fell 1 cent, or 0.9%, to 1.100 euros.

The Bank's Monetary Policy Committee member Andrew Sentance said there was a chance of a double-dip recession.

The pound has been falling recently in the run-up to the general election.

"You have to recognise there is some risk of a double dip, but that's not the central forecast," Mr Sentance said.

The UK exited recession during the last three months of last year, but growth remains weak.

There are also concerns about the high level of UK public debt, although figures released on Thursday suggest borrowing this financial year will come in under the government's forecast.

Deficit cuts

Uncertainty about who will win the election, and whether there might be a hung parliament, has increased concerns about plans to cut debt levels.

This uncertainty has weighed on the pound.

The government has been forced to borrow heavily during the downturn, and the UK's budget deficit currently stands at 12.6% of GDP, one the highest in Europe.

Labour has announced plans to reduce the deficit to 4.7% by 2015, arguing that making more drastic cuts could harm the UK's recovery from recession.

But a European Union report released earlier this week said the plans were not ambitious enough.

The Conservatives also argue that cuts need to be made more quickly.



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