France now £70bn richer than Britain, overtaking us in World rich list

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The often sluggish French economy is now worth £70billion more than the UK's, following the dramatic fall of sterling against the euro.

It slips into fifth place behind the US, Japan, Germany and China - all had larger outputs than the UK in the final quarter of last year, according to new figures from the National Institute of Economic and Social Research (NIESR).

Projections also suggest that France's gross domestic product (GDP) will grow by 2 per cent in 2008, compared to 1.9 per cent in Britain.

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The often sluggish French economy is now worth £70billion more than the UK's

Radical labour reforms proposed by President Nicolas Sarkozy to boost productivity are set to further challenge the UK economy as it struggles with the impact of the "credit crunch" sparked by the American subprime home loans crisis.

Although Britain's GDP is still marginally larger than France's, it is the falling value of the pound against the euro that is immediately responsible for the place swap.

Sterling's fall from an average of 1.47 in 2006 to around 1.32 in the past six months means the UK economy has gone from being 6.7 per cent larger than France's to 4 per cent smaller.

The fall coincided with a fresh assault by Shadow Chancellor George Osborne on Labour's stewardship of the economy, accusing Prime Minister Gordon Brown of "economic incompetence and fiscal incontinence".

He said: "The system of financial oversight he personally insisted on left Britain as the only country facing a run on the bank. His taxes and regulations have left the British economy more inflexible and less competitive."

Labour, however, insisted the Conservatives had a "black hole" in their spending and tax plans.

NIESR director Martin Weale claimed the new figures represented a looming "political economic cataclysm" which would hit incomes first, although he admitted there would be no immediate effect on living standards.