NI Economy Positive Despite 'Crisis'

It has been claimed that Northern Ireland's economy should be well able "to avoid the worst of the global financial downturn", despite growing national concerns over banking and finance.

As financial giant Halifax Bank of Scotland, (HBOS) the UK's largest mortgage provider, was today being hit hard by a whirlwind of financial speculation, locally, First Trust Bank is saying that as public expenditure is higher in Northern Ireland than in Britain, this should safeguard local living standards.

First Trust says talk of a serious recession in Ulster is therefore "dangerously misleading".

The bank said today that consumer confidence will "remain fragile" but compared to other parts of the world, that Ulster's economy is "not in bad shape".

The news comes as Halifax, which has one of its busiest UK call centres located in Belfast, faces huge levels of speculation.

But instead of faltering, it has now emerged that Halifax is on the brink of a 'major coup' by brokering a merger to create a new, enlarged business.

HBOS has confirmed it is in advanced talks with Lloyds TSB about creating a UK retail banking giant worth £30bn.

The Government has also said it will over-rule any concerns that competition authorities may raise.

The BBC is reporting that the Prime Minister is even involved in negotiating the deal, and has said that it has the blessing of UK authorities.

The national concerns surrounding parent company HBOS - which has £160bn in deposits and £256bn of outstanding mortgages - are said to be in part rumour, and only part fact.

A series of major US institutions previously thought 'invincible', such as Bear Stearns, Fannie Mae and Freddie Mac, Merrill Lynch, Lehman Brothers and now AIG have already run into difficulties, and traders simply asked "Who next?" and then seized on the slightest hint of any real - or perceived - weakness in the British banks to sell into a plummeting market.

Later, confidence was further undermined with the news that AIG Life had suspended withdrawals from two of its British funds yesterday, after being inundated with requests for redemptions following news that the insurer is on the verge of collapse.

This is the first time during the credit crunch that retail investment funds, rather than bank deposits, have been threatened.

Given its exposure to the property market the turbulence centred on Halifax Bank of Scotland Group (HBOS): shares in the bank were down almost 40% at one point yesterday, although it ended the day with a fifth of its worth destroyed, while the Royal Bank of Scotland lost a tenth of its value.

The FTSE 100 also fell to a three-year low - more than £500bn was been wiped off UK shares this year.

News of a merger, valuing HBOS shares at 300 pence, came initially from BBC Business Editor Robert Peston.

(BMcC)