Markets braced for further falls

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A day ahead of the release of GDP figures expected to show the first quarter of negative growth since 1992, trading was expected to be volatile in London with experts increasingly gloomy about the prospects for the economy.

The pound slumped to a five-year low of 1.62 US dollars on Wednesday, and also fell against the euro in what is close to its worst week since sterling's ejection from the European Exchange Rate Mechanism in 1992.

Foreign exchange, gilts and equity markets all reacted strongly to the Prime Minister and the Governor of the Bank of England admitting that Britain is likely to enter its first recession in 16 years.

London's blue chip FTSE share index fell 4.5% to close at 4040.9, with the Cac 40 in France and Germany's Dax both finishing more than 5% lower and the Dow Jones Industrial Average on Wall Street plunging nearly 300 points in the first few hours of trading.

The falls came as the White House announced a US-hosted world summit to discuss the economic crisis would be held in Washington on November 15.

Britain is not technically deemed to be in recession until two successive quarters of negative growth have been recorded - something which cannot take place until the next round of quarterly figures are released in January.

But following Bank of England Governor Mervyn King's recession warning on Tuesday, the Prime Minister was forced to concede myriad expert predictions were almost certainly correct.

"Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too," Mr Brown told the House of Commons.