Financial crisis: FTSE drops to five-year low

The pound lost more than six cents against the dollar as renewed fears over the global recession reverberated into the money markets.

Steep fall in share prices in Asia overnight, fuelled by fears that recent government interventions to shore up financial markets might not be enough, dented confidence as trading got under way in London and across Europe.

The renewed turmoil came as Gordon Brown moved to defend plans to increase borrowing and spending as "the responsible course" to help lift the country out of recession.

A sharp divide in opinion has opened up between economists who want tax cuts to stimulate growth and the Government's plan to kick-start the economy with big building projects and other major spending.