Britain’s financial sector remains vulnerable to further global shocks and the Bank of England must be ready to rescue banks that run short of funds, Threadneedle Street warned on Thursday.
Without a permanent emergency lending facility to support the banking sector, the UK could suffer another Northern Rock-style collapse, it said.
The report’s findings follow research that shows the UK’s economy is one of the most open in the world, and that the drop in output after Lehman Brothers went bust was mostly due to “global influences”. The research also found that around two thirds of the weakness in the level of UK output since 2007 can be attributed to “world shocks”.
It said: “The UK economy is closely integrated with the rest of the world through the trade of goods and services, and the exchange of financial assets. This interconnectedness means that the UK economic environment is shaped, in part, by events in the wider global economy. These events can be external to the United Kingdom, or common to many economies, including the United Kingdom.”
via The Guardian
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