Over the course of the recession the UK has seen its balance of trade deficit fall - that is, the gap between what the UK imports and what it exports has been declining. This is directly linked to the recession through a number of mechanisms.

Firstly, the fall in the value of sterling has made foreign goods sold in the UK more expensive from the perspective of UK consumers. As such individuals have shifted their consumption towards UK-produced goods and services.

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LIBOR and Base Rate

At the peak of the financial crisis, the divergence of LIBOR and Base Rate was cited as a major symptom of the freezing up of credit.

In November 2008 the gap between LIBOR and Base Rate peaked at 2.5 per cent. Since then it has been declining and now stands at 0.08 per cent - some way below the historic average. So, if the gap between LIBOR and Base Rate is an indicator of the health of the financial system, why do credit conditions remain so tight?

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Mortgage Interest Rates

Whilst the Base Rate remains at an all-time low of 0.5 per cent, average mortgage interest rates continue to be stubbornly high. The gap that has opened up between average tracker and SVR rates over Base Rate - at around 3.4 per cent - is an historic high. Fixed rates have also spiked in recent months, with an average fixed rate now at 5.7 per cent. This is a truly exceptional margin over Base Rate.

The previous section discussed one of the reasons that rates are so high - there is simply not the available capital in the system with which to lend. Banks are under-capitalised and face a major task in rebuilding their balance sheets.

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Public Sector Debt

The Government's Sustainable Investment Rule aimed to hold public sector debt (the total amount owed by the government to the private sector) at around 40 per cent, over the course of the economic cycle. The latest data shows debt to actually be 57 per cent of GDP and growing. Forecasts from the 2009 Budget show the debt level increasing to 80 per cent by 2014.

The UK debt level has grown due to the nationalisations of several major banks, in the process staving off the worst of the financial crisis. More recently, the Bank of England's programme of quantitative easing has been buying up vast quantities of government debt. This is effectively monetising public sector debt, converting it directly into new money that is immediately available for spending - not too far off from printing money to fund spending.

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