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The decline of the Pound is the great unreported news story of the current times. It has fallen so far now that in previous times it would have been called a devaluation. The Pound reached a new daily record low of 1.1236 Euros on Thursday. That is the lowest level since the euro was launched in 1999.

The pound gained one cent against the US dollar, reaching $1.4967, as against 1.4827 on Wednesday. Sterling was pushed lower after figures from the Confederation of British Industry confirmed a sharp downward trend in manufacturing.

The UK currency is expected to remain under broad selling pressure amid a grim outlook for the British economy.

More important even than the outlook for the economy is that investors have been losing faith in the UK since it now seems to be moving rapidly towards recession.

Contrary to repeated claims by Brown and his cronies, the trouble in the credit markets has hit the UK harder than other countries, especially as the financial sector accounts for a bigger part of the UK economy.

And with consumers having borrowed heavily in the good times, and the government now facing a huge budget deficit, currency traders were in no doubt that the UK economy was in trouble and the time to start selling sterling had arrived.

Another reason is that the Bank of England has cut interest rates in the UK from 5% to 2% in the space of just three months. Rate cuts generally encourage investors to switch to other currencies which have a higher rate of return.

There is some good news; some analysts have expressed doubts that the rise of the euro against the pound is a sustainable trend, particularly if European economies also continue to weaken.

Interest rates have been cut both in the UK and in the eurozone, but they remain higher in the 15-member euro currency area.

But after the Bank of England has made two sharp cuts in rates, bringing them down to 2%, many analysts expect more in the pipeline. Further cuts will lead to further weakening of Sterling.

A weaker pound is better for the UK exporters but is bad news for British holidaymakers who plan to go abroad during the Christmas season, and also makes imported goods more expensive. All those expensive electronic toys are going to be much more expensive this Christmas than last.

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In a move welcomed by debt charities across the country, credit card companies have agreed to offer some breathing space to consumers struggling with repayments. The new set of “fair principles” should see the card providers back off from raising interest rates when customers fall into arrears on payments.

The deal comes after the firms faced pressure from the government to give more help to struggling customers. However, one accountancy firm says rising costs could lead to new annual fees on credit cards “becoming the norm”.

Some of the measures were announced following a meeting between card providers and the government two weeks ago. Then, the companies were sent away from the credit card summit with a deadline set by the government to commit to a set of new principles. Now they have agreed to measures including an option for customers to transfer deals, or freeze the account and pay off debts at the existing interest rate if the company wants to raise its Annual Percentage Rate (APR).

The government wanted to tackle risk-based pricing, when companies took swift decisions to raise the interest charged based on the risk of people defaulting on their borrowing. The companies have also agreed not to raise interest rates if a customer fails to make the minimum repayment for more than two months, if the customer already has a repayment plan in place or they are in “serious discussion” with a debt advice group.

The plan, which comes into effect on 1 January, also includes a pledge from the providers of credit cards and store cards not to increase interest rates in the first 12 months, and no more frequently than every six months thereafter.

If it does decide to raise the APR, customers will be given 30 days notice of the change. There is no mention in the principles, however, that instructs credit card companies to pass on any cuts in the Bank of England’s Bank rate to credit card borrowers.

The card providers had already agreed to a 60-day breathing space for borrowers in difficulty. The government says anyone who believes a previous rate rise was unfair should take their case to the Financial Services Ombudsman Service which can order compensation to be paid

Accountancy firm PricewaterhouseCoopers (PwC) has warned that borrowers could face increased costs from another angle, including those who regularly make repayments. It repeated its prediction that annual fees on credit cards could “become the norm” as credit cards profitability comes under threat. They added that issuers were also likely to limit the number of 0% balance transfer deals.

There are 31 million credit cardholders in the UK, borrowing billions of pounds. About half pay off their debts at the end of every month, making interest charges irrelevant, according to the UK payments association Apacs. But the economic downturn is expected to push more people into difficulty making repayments, and into a spiral of debt.