R-word sees markets tumble

Share prices in London, New York and Asia suffered another day of dramatic losses after a gloomy forecast by Gordon Brown. The Prime Minister admitted for the first time that recession is inevitable. His comments come ahead of official figures that will show Britain slipping into negative growth in the past three months.

Brown told the Commons: "Having taken action on the banking system, we must now take action on the global financial recession which is likely to cause recession in America, France, Italy, Germany, Japan and - because no country can insulate itself from it - Britain too."

Brown's comments followed a warning by Bank of England governor Mervyn King that the economy was heading into a recession. Yesterday King's admission saw the pound fall to its lowest level in five years against the dollar yesterday. At one point, the pound fell to just above $1.62, a 19 per cent drop from the $2 a pound would buy as recently as July and the lowest level since 2003.

London's stock markets are braced for more falls today following sharp decliins in US and Asian share prices overnight.