UK economy at highest risk since Lehman’s crisis, says report

The UK’s financial system is at its greatest risk since before the collapse of Lehman Brothers in 2008, a new report has revealed.

According to the Bank of England’s (BoE) Systemic Risk survey, more than half of the respondents said that the likelihood of a “high-impact event” to be either high or very high – with only three per cent saying the chances were low.

Confidence levels surrounding the financial system fell to their lowest levels in the second half of 2011 since the second half of 2009 with more than a quarter saying they were not confident in the stability of the infrastructure.

In the research, the BoE said: “The perceived probability of a future high-impact event in the UK financial system increased sharply in 2011 H2, compared with 2011 H1.”

The report listed the top threats to the financial system as seen by the 68 participants - sovereign risk (cited by 76 per cent), the risk of a downturn (76 per cent), funding risk (57 per cent), regulatory risk (38 per cent) and the risk of a financial institution collapsing (26 per cent).

Sovereign risk was the top risk for nearly two-thirds of respondents in the research.

By Jim Ottewill