British debt out of control?

In his speech yesterday Mervyn King spoke in detail about the amount of financial support that has been given to the UK economy. Including guarantees it stands at a staggering £1,000,000,000,000, 1 trillion pounds or two thirds of the UK's total annual output.

He stated that "we shall be paying for the impact of this crisis on public finances for a generation" and later said that "never has so much been offered by so few to so many."

The only way I can see this being repaid is by very agressive spending cuts and increases in tax. This could be further bad news for the UK economy as companies, investors and top earners look to base themselves elsewhere.

This in turn could be bad news for Sterling as the flow of money out of the Pound into other currencies should lead to Sterling weakness and lower exchange rates.

For a more detailed look at todays market movers take a look at FCD's market report here written by one of our senior dealers Stephen Eakins.