Even as the U.K. rebounds from the recession it faces a budget deficit totaling more than 12.5 percent of its gross domestic product (GDP), the highest level in the developed world, The Wall Street Journal reports. “Battered in the early stages of the financial crisis because of its heavy reliance on the finance industry and consumer spending, the government steadied the economy by priming it with billions of pounds.”
Now the British government will need to recover by raising taxes and cutting spending—which economists predict could derail consumer spending. A report released last month by Prime Minister Gordon Brown’s Labour Party, found Britain will need to pare down government spending or increase taxes proportionate to an extra 0.5 percent of GDP in order to help stabilize public funds.
The latest figures show Britain as the last developed nation in the Group of Twenty to begin crawling out of recession. GDP dropped 0.2 percent in the third quarter, while other EU countries such as France and Germany experienced growth, as did the United States and Japan. The deficit this year will likely be more than $280 billion (12.5 percent of GDP)—topping the 9.6 percent in the U.S. and the 6.9 percent average in the rest of the European Union.
Though Brown is focused on deficit reduction, he promotes entrepreneurial growth as “the best antidote to debt, both in the short and long term,” according to a Daily Telegraph story.