King is Pessimistic

Bank of England governor Sir Mervyn King has said he is "pessimistic" about the short-term prospects for the global economy. King also said he had been struck by how much the situation had changed in the past six weeks and that he was particularly concerned about the worsening situation in Asia and other emerging markets. His comments followed official data showing the British government borrowed more than expected in May, it borrowed £17.9bn, compared with £15.2bn in May 2011, a fall in income tax receipts contributed to the rise in borrowing.

King went on to say "Over two years now we have seen the situation in the euro area get worse and the problem being pushed down the road," He said "There is just enormous uncertainty out there, I have no idea what is going to happen in the euro area."The BOE governor confirmed he would be prepared to cut interest rates further if "that turns out to be necessary". King was one of four members of the Bank of England's Monetary Policy Committee to vote for additional quantitative easing at its last meeting to try to stimulate the UK economy.

Britain's  increase in borrowing was driven by a 7.3% fall in income tax receipts and an 11.7% jump in welfare benefits. This is a situation faced by many nations. Economists said May's figure suggested the government would struggle to meet its target of trimming total borrowing in 2012-2013. Vicky Redwood, chief UK economist at Capital Economics, said she expected the government to overshoot its goal "significantly". Britain's total public sector net debt, excluding financial sector interventions, rose to £1.013 trillion. This is equivalent to 65% of GDP, a record for the month of May and the third-highest level on record since the series began in 1993.