Economy 'slowing', ONS Says

The British economy grew by just 0.2 percent from May to June, the slowest quarterly increase since early 2005.

New official figures from the Office for National Statistics also show that the annual growth rate now stands at just 1.6 percent - far from 2007's three percent growth total and a further sign that the credit crunch is continuing to take its toll on the economy as a whole.

The effects of the crisis have also shown in recent falls in mortgage lending, with the British Bankers Association saying this week that home loans approval numbers have dropped by 66 percent in a year. Moreover, UK retail sales also dropped last month by 3.9 percent according to the ONS - the sharpest fall since at least 1986.

A key feature of the crunch is high inter-bank lending rates, which have come about due to financial firms being unsure about their rivals' exposure to bad debt. This risk-averse attitude has had a knock-on effect at consumer level, with people finding it much more difficult to secure mortgages, credit cards and personal loans thanks to institutional nervousness.

"June's data finally showed the official data moving into line with the gloomy anecdotal evidence," economist Vicky Redwood told the BBC. "What's more, we think that spending growth will weaken considerably further, as house prices keep falling and inflation and unemployment rise further."