The current state of the UK economy has been reflected in the recently announced half year profits of the major UK banks with RBS reporting the second largest loss in UK banking history of £691m. It would seem that there is still considerable nervousness that the full effect of the sub-prime loan debacle has still to come out in the wash and that the effect of the slowdown in the UK economy is yet to make its presence felt – the prognosis is dire! Overall inflation, as measured by CPI, is running at 4.4%, well above the 2% target, with food prices rising by 9.5% in the year to July, whilst house prices, according to the Halifax, are 11% lower than July last year.

With this background it was not surprising that the Bank of England held rates again this month at 5%. The outlook is gloomy with the IMF predicting the UK economy will grow by a meagre 1.4% this year and by 1.1% in 2009.