April 23, 2009

U.K. government support for the banking system has risen to 1.4 trillion pounds ($2 trillion) and may climb higher as the financial crisis spreads to building societies and economists warn lenders may need more aid.Prime Minister Gordon Brown’s government yesterday offered to guarantee some mortgage-backed bonds, adding as much as 50 billion pounds to the bailout that began with the collapse of Northern Rock Plc in 2007.

The amount invested in, loaned to or pledged to back bank assets now equals Britain’s gross domestic product, or 22,800 pounds for every person in the U.K.“The size of this financial bailout is unprecedented,” said Alan Clarke, an economist at BNP Paribas in London. “The worry is that this is not going to be enough and the government may need to come back and step in again.”Britain’s budget deficit rose to 12.4 percent of GDP as the government took over four banks, insured assets and underwrote loans to spur an economy ravaged by the global credit crisis.