Worst financial crisis in human history

Bank boss warns that the pain is just beginning..

• Economy outstrips forecasts to shrink by 0.5%
• Pound suffers worst fall against dollar for 37 years
• FTSE plunges 9% before rallying to close down 5%
  
• Asian markets tumble for a third day amid global fears

Consumers face higher shop prices, dearer fuel and more expensive holidays after the pound slumped yesterday.

Sterling took a hammering as economic figures showed the UK approaching full-blown recession.

Bank of England deputy governor Charlie Bean warned that the pain is just beginning, calling the situation the 'largest financial crisis of its kind in human history'.

On the 79th anniversary of the Great Crash of 1929:

• Britain's economic output slid 0.5 per cent - more than twice the decline expected by the City;

• Markets tumbled around the world, with leading UK shares losing almost £50billion;

• Sterling had its worst-ever week against the dollar since 1971 and hit a record low against the euro;

• The oil cartel Opec cut production, a move likely to increase petrol prices up to 5p a litre;

• Experts warned that hedge funds are facing disaster, with billions likely to be wiped off savings and pension funds;

• Hundreds of jobs were axed in the insurance, cosmetics, haulage and textile industries.

The plunge was prompted by the worst set of UK growth figures for 18 years, recording the first time that the economy has officially contracted since 1992.

The Office for National Statistics reported UK output dropping 0.5 per cent between July and September.

Another fall in the final three months of the year would propel Britain into the first official recession since the days of John Major.

Tory leader David Cameron declared: 'This is the day the recession became real.

'We have had ten years of a Government saying no more boom and bust. We have had ten years of a Government not putting aside money for a rainy day. Well, that rainy day has now come.'

At one stage, the pound was worth as little as $1.52, prompting speculation that the UK was on the brink of a currency crisis.

Although it later rallied, it has lost a quarter of its value against the dollar over the past year.

Foreign investors are less willing to finance the UK because of its record debt burden and slumping economic output. The rush to sell sterling means prices of imports like clothing and electronic goods will rise, holidays will cost more and overall living standards will suffer.