LONDON (AP) — 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.
''If you look at the consensus of the economic forecasters, it would be prudent to assume that (the credit squeeze) will have some effect on us here,'' he said.
The government's forecast for Britain's economic growth currently stands at 2.5 percent to 3 percent.
Darling said the tightening of global credit markets and weakening in the U.S. housing market would make it harder and more expensive to borrow money in Britain.
''If you look across the world — given the importance of the U.S. economy and given what's happened here in relation to the effect it will have on the availability of credit — it would be fairly odd if you didn't take account of that,'' Darling told the Financial Times.
The Treasury chief is set to deliver the government's Pre-Budget Report to the House of Commons on Tuesday.
HSBC gave a bleak outlook in a report titled Kingdom Under Siege according to The Daily Telegraph.
''Sterling's outlook is increasingly taking a turn for the worse. A deeper downward move against a broad range of currencies is on the horizon,'' the bank said.
HSBC expects the pound to fall from around $2.04 to $1.76 against the dollar over the next eighteen months, even though the dollar itself is in danger of losing its status as the world's ''anchor currency'', the newspaper said.
David Bloom, HSBC's head of currency research, said signs that the Bank of England's monetary framework was ''starting to fray at the edges'' had begun to unsettle investors, tarnishing the reputation of Britain's financial sector, the Telegraph said.