Now HSBC is caught up in shares plunge

SHARES plunged dramatically today as ministers braced themselves for confirmation that Britain is heading into recession. Figures will show that the country is suffering negative growth for the first time in 16 years.

Among the worst affected stocks were HSBC and Standard Chartered banks, which are both heavily involved in emerging markets, and commodities companies which are facing a big fall in demand for their products because of the slowdown.

Within minutes of opening, the FTSE 100 had fallen by 200 points taking it below the 4,000 mark to a new low of 3,886, an overnight drop of nearly five per cent.

The sharp decline was prompted by concern that the credit crunch has now spread to emerging markets in the Far East, Latin America and elsewhere and sent some industrial and banking stocks into freefall.

Analysts predicted that today's Office for National Statistics figures, which come as the pound plummeted below $1.60 on international money markets, would show that the country's gross domestic product had declined during the three months to the end of September.

They also warned that further bad news was inevitable in the coming months and that official confirmation of a recession, defined as two successive quarters of negative growth, would come in January's figures. Gordon Brown, who this week acknowledged for the first time that Britain is heading into recession, has sought to lay the blame for the decline on world economic conditions and the impact of the banking crisis.

Opposition politicians are certain to seize on the figures as further proof that Mr Brown has failed to deliver his pledge to have ended "boom and bust" because of a lax regulation of the banking system and an excessive reliance on borrowing and cheap credit.

Today's decline in GDP is the first time that growth in Britain has entered negative territory since the second quarter of 1992, just before the "Black Wednesday" exit from the European Exchange Rate mechanism brought the economy back into the black by boosting exports through a sharp drop in the value of sterling.

Deloitte's director of research Ian Stewart said that he believed the whole of 2009 would be a "write-off" and that any recovery would not begin until 2010. "The distress in the banking system has made this different to any recession we've seen before," he added.

Banking chiefs warned that business failures are inevitable and motorists were told that petrol prices could rise

Angela Knight, of the British Bankers' Association, said: "What we can't do unfortunately is reverse a poor economic situation. It seems inevitable that some businesses will not survive, even with the best assistance that banks, government and voluntary agencies can give them."

At a meeting in Vienna, members of the Opec oil cartel were discussing calls for a cut in production to counter the impact of the recent fall in prices. Such a move would push up forecourt prices.

The retailer John Lewis added to the gloom by reporting a 7.6 per cent decline in year-on-year sales for last week significantly worse than the equivalent figures over the previous fortnight in a further sign of a potentially traumatic run-up to Christmas on the high street.