Snow not London's only similarity with Reykjavik

LONDON BRIEFING:GORDON BROWN may detest London's new-found nickname, Reykjavik-on-Thames, but, as the capital awoke on Monday to find itself blanketed in a foot of snow, even the prime minister would have been forced to admit there were some similarities between the two cities .

Except for the chaos, of course. Iceland may have gone bust and its government has collapsed, but in Reykjavik the buses and trains are still running despite the Arctic conditions.

In London, on the other hand, what would pass for a light dusting of snow in Iceland brought the capital to a virtual standstill, crippling the transport system and leaving millions unable to get to work.

Across the country, one in five people were estimated to have been unable to reach their places of employment, but in London the figure was far higher. For many, there was simply no way to get to work - a bus service that managed to keep running through the Blitz was suspended for almost the entire day and the over-ground and underground railway systems barely functioned.

With most schools also closed, it was for many a welcome chance to have a bit of fun. The parks were filled with children building snowmen and sliding down hills on makeshift sledges. In Canary Wharf, stressed-out traders forgot their cares for a while as they engaged in running snowball fights.

The last time London suffered such severe weather was, coincidentally, at the time of the last recession in 1991. Then, as now, the economy was doing the equivalent of a rapid downhill slalom, with no end in sight. That slalom run got steeper and scarier last week when the International Monetary Fund warned that Britain's recession would be the deepest of all the major industrialised economies.

It is now forecasting the UK economy will contract by 2.8 per cent this year, a significant downward revision of its previous figure. Growth in 2010 is put at a mere 0.2 per cent. This is despite the government's much-criticised and so far unsuccessful attempt to spend the nation's way out of recession and keep the crippled banking system afloat.

A separate report from the Institute of Fiscal Studies think tank, its so-called "Green budget", said that the only way the bailout bill can be funded is to either raise taxes by £20 billion or cut spending by the same amount. Either way, government debt will remain above pre-crisis levels for 20 years, the IFS warned.

Gordon Brown winced last week when, on stage at the World Economic Forum in Davos, he was publicly confronted with the phrase "Reykjavik-on-Thames."

He dismissed the suggestion that the UK is heading for the same fate as Iceland but admitted that the recession would be a deep one. Sensibly, he refused to put his neck in the noose by predicting the timing of the recovery. He also rejected the recent widely reported comments by veteran trader Jim Rogers, who warned that the UK was "finished" and urged anyone still holding sterling to sell it. "You're not going to build your policy around the remarks of self-interested speculators," Brown said.

But the brutal revision of the IMF forecasts has once again called government policy into question, as Brown has repeatedly said Britain is better placed to negotiate the downturn than most.

Meanwhile, business organisations put the cost of the chaos caused by the snow at more than £1 billion and one economist warned that the "extreme weather event" could be the last straw for thousands of cash-strapped smaller companies. About the only people to have done well out of it are manufacturers of cat litter, which is apparently excellent for gritting roads and pavements - and cheap too.

The precise damage to the economy is impossible to quantify; suffice it to say, it could have done without it at this stage of the downturn.

And so could the prime minister. Memories of being hailed the saviour of the world's financial system last year are fading fast, along with Brown's reputation on the international stage.

The rest of the world looked on this week with a mix of amusement and incredulity as a foot of snow brought Britain to a standstill. The prime minister chose to interrupt his press conference on Monday with the visiting Chinese premier, Wen Jiabao, to reassure the public that everything possible was being done to cope with the conditions.

The trouble is, Brown's words on the weather were about as reassuring as his recent pronouncements on the economy. And we can only imagine what Wen made of it all.

Fiona Walsh writes for the Guardiannewspaper in London