David Buik is a leading City commentator and partner at London-based money brokers BGC Partners.
London, England (CNN) -- No one who has studied the markets for the last 80 years will be remotely surprised that sterling has fallen by over eight percent against the dollar since the turn of the year and continues to lose ground against the euro.
Markets cope well with good news and brilliantly with bad news, but it only deals with uncertainty in a vituperative manner.
Right now we have all the ingredients of a sterling crisis. The polls tell us that there may be a hung parliament at the next British election -- thought to be in May -- and much more to the point, the current government refuses to deal with its gargantuan public sector borrowing requirement of £190 million ($285 million). It just talks in platitudes of halving it in the next four years.
But details of amounts and cuts are non-existent, as they are vote losers. The suggested narrowing of the polls in the past week is down to the fact that the opposition Conservative Party has failed to articulate alternative policies in a clear and attractive manner. But they seem braver in outlook than the ruling Labour government.
Unfortunately Prime Minister Gordon Brown suffers from acute attacks of indecision, and foreign exchange dealers capitalize on that fact. They will continue to metaphorically "rip the skin of the face" of the pound until there is some decisive action.
The Labour government has also neglected manufacturing output and industrial production for over a decade in favor of the service sector, which includes banking. This makes the economy less balanced, so recovery through export-led operations will be slower.
Brown, on all known evidence, should never be given another chance. His government has systematically ruined this country. He has pillaged pensions to the tune of about £100 billion ($150 billion). He was out of control in allowing banks to indiscriminately build up heir balance sheets and lend money without significant regulatory controls. During the last 13 years he has been profligate with our money and the country has little to show for it. We are far worse off than we were a decade ago. The stock market is now 20 percent lower than it was in December 1999.
Will the UK lose its AAA credit rating? No! But it is dicing with death in the wake of Greece's problems and those of other Mediterranean countries. And of course the domino effect that the huge U.S. deficit could create.
But the UK economy should never be compared to Greece's -- it is much stronger. We are blessed with having a brilliant Governor of the Bank of England in Mervyn King and a superb director of Financial Stability in Paul Tucker. But we have a willing finance minister in a tired and worn out government.
The UK needs a fresh approach soon. Gordon Brown is continuing to make the same mistakes as a number of former Labour prime ministers and finance ministers: Ramsay MacDonald in 1931; James Callaghan in 1966 and Denis Healey in 1974. Deal with the deficit or pay a big price, a sterling crisis!
The opinions expressed in this commentary are solely those of David Buik.