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Darling warns credit squeeze will hit the UK economy

The Chancellor has warned the current credit crunch is likely to have an effect on the UK economy and is set to down-grade his growth forecasts for 2008.

In an interview with the Financial Times, Alistair Darling said “it would be prudent to assume it will have some effect on us here”.

Darling is expected to down-grade his 2.5 per cent to 3 per cent growth forecast for 2008 in the pre-Budget report, which will take place next Tuesday.

Darling said: “It is less than two months since the current situation manifested itself. Where does that leave us? In terms of how I see things looking forward, I think it means that we have to be cautious.

“It certainly means that we’ve got to stick to the discipline that we’ve imposed on ourselves these past few years, that we avoid getting ourselves into a situation where you’re ever tempted to make promises that you simply can’t keep, that you can’t afford.”

“So the position I see is that there will undoubtedly be an effect. It’s too early to say what it is, but I think all economies right across the world need to be aware of that.”

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