Britain’s economic expansion has been hurt by the crisis in the financial markets, Treasury chief Alistair Darling warned, apparently signaling a reduction in the growth forecast for 2008. His remarks came ahead of a crucial budget report to be delivered next week.
HSBC, the nation’s largest bank, said that Britain faced investor flight in the coming months as the slowdown in growth reduced confidence in the country’s economic management. Darling told the Financial Times in an article published Friday that the market turmoil, which prompted September’s run on mortgage lender Northern Rock, would “undoubtedly” have an effect on Britain.
Subprime loans were packaged a securities and sold around the world. Often rated AAA, these items became worthless or their value dropped. As the crisis spread around the world many investors could not tell how many bonds they held, nor could they determine their overall exposure to the subprime problem. HSBC was one of the biggest subprime lenders in the United States, packaging debt and reselling it. HSBC bought predatory lender Household International in 2003 and continued operations, scaling back by April 2007. By September 2007 HSBC began a series of layoffs.
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