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UK warning over world economy

The UK Chancellor outlined the full cost of the war on terror to the British taxpayer

LONDON, England -- The man who dictates and shapes the UK's economic policy has said there are "real risks" for the world economy following the September 11 attacks in the U.S.

Chancellor Gordon Brown predicted that the British economy would weather the world economic slowdown better than most economists had forecast.

In a pre-Budget statement to the House of Commons on Tuesday, Brown painted a gloomy picture of the world economy post-September 11.

He said the UK armed forces will receive £100 million ($150 million) towards the war on terrorism with another £20 million ($30 million) going on intelligence work.

Another £30 million ($45 million) will go to the Metropolitan Police in London and other forces to pay for increased policing since September 11.

In addition, £100 million ($150 million) will go towards the humanitarian effort in Afghanistan, he said.

Brown was speaking as the Lloyd's of London insurance market increased its estimated losses as a result of the U.S. terrorist attacks to £1.9 billion ($3 billion).

Lloyd's, which had previously estimated it would lose £1.3 billion ($2.1 billion) from the disaster, said it had increased its estimate by 45 percent after new property claims came to light.

It added that its exposure to the disaster through reinsurance contracts had also risen as insurers that had taken out cover with Lloyd's had increased their estimated exposure to the strike.

Brown said America and Japan were in recession, as were other Asian economies.

"The euro area is slowing rapidly and world trade growth has fallen dramatically from 12 percent growth last year to only one percent this year," he said.

"Growth among the main G7 countries is expected to slow from 3.5 percent last year to just one percent this year.

"For the first time in three decades each region of the world has slowed at one and the same time, and more sharply than before."

He said a "new deal for prosperity" must be forged between rich and poor countries, and that the UK would be proposing to the U.N. a new $50 billion (£35 billion) international fund to act as a Marshall Plan for the Third World.