This Is Guernsey

CREDIT conditions are expected to get worse before they improve, according to Bank of England agent John Whitley.

The slump has prompted many mortgage lenders to withdraw their products from the market. Mr Whitley (pictured) was in the island last week to ask local businesses what they thought about the current state of the economy.

The information will form part of a regular report and then be submitted to the Monetary Policy Committee – the body that sets UK interest rates. Some experts have described the global credit slump as the worst financial crisis since the Second World War.

Mr Whitley said that while he could not comment, MPC deputy governor Rachel Lomax had made a similar statement in a recent speech.

It was his third time in the island. The first was a fact-finding mission to establish whether the business community was happy to talk to the MPC. In October he visited again with MPC member Kate Barker and said she had found the experience very interesting.

Mr Whitley said the problems with Northern Rock had undoubtedly been a steep learning curve for the UK Government.

The bank was recently nationalised after efforts to sort out a suitable rescue package with a private buyer fell through.

‘Northen Rock has raised some challenging issues for the UK authorities in terms of arrangements for financial institutions in difficulty and for the protection of depositors.

‘Consultation is currently under way. Special arrangements had been made for depositors with Northern Rock, but the case for a more permanent change is under consideration.’