British finance minister concedes economy slowing

27th November 2011, Comments 0 comments

British finance minister George Osborne conceded on Sunday that official figures would this week confirm a slowdown in the economy, but promised a new £40-billion scheme to help small businesses.

He was speaking ahead of his autumn statement to parliament on Tuesday, in which he will set out his economic plans following the latest data from the independent Office for Budget Responsibility (OBR).

The OBR predicted in March that gross domestic product (GDP) would grow by 1.7 percent in 2011, but this is expected to be sharply downgraded on Tuesday. The Bank of England estimated a figure of one percent earlier this month.

"International bodies, forecasters in the private sector, they're all saying the same thing, which is the British economy has slowed," Osborne, whose official title is chancellor of the exchequer, told the BBC.

"By the way so has the American economy, so has the German economy, so has the French economy. I'm not using that as an excuse; I'm using that as an explanation for why this is an exceptionally difficult time."

The slowdown is likely to spell bad news for the government's plan to eliminate the deficit in five years, although Osborne said: "I am confident we are going to meet the targets we set out."

He also unveiled details of an initiative to boost the private sector, in which the government would underwrite bank loans to struggling small businesses worth up to £40 billion (46.65 billion euros, $61.75 billion).

"The basic idea of this national loan guarantee scheme is to use the fact that the government can borrow very cheaply to help small businesses borrow money more cheaply than they do at the moment," Osborne said.

"The government will underwrite the loans the banks make to small businesses, in order to cut the interest rates that small businesses pay.

"That will help with their cash flow, that will help them retain their workforces, that will help them expand and invest."

He added: "We are making available £20 billion for the national loan guarantee scheme, however it sits within an envelope that could be as large as £40 billion."

© 2011 AFP

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