Britain's public finances deteriorated sharply in December, putting them on track for their worst year since records began after World War Two, while the number of Britons out of work approached two million.

The official data released on Wednesday dealt another blow to the pound, still reeling from the previous day's dramatic collapse, as investors fretted about Britain's growing debt burden and the fate of its banking sector.

"Another dire day for the UK economy with data for December showing unemployment soaring, the public finances deteriorating sharply and mortgage lending remaining moribund," said Howard Archer at Global Insight.

The Office for National Statistics said the public sector posted a net cash requirement of 44.2 billion pounds ($62 billion) last month, its highest on record.

Almost half of this was due to the government's recapitalisation of Royal Bank of Scotland. Another two billion pounds was used to shore up building society Bradford & Bingley and refinance financial services compensation scheme loans.

Even without that, the public finances looked in bad shape.

The government's preferred accruals-based measure of borrowing came in at 14.9 billion pounds, only slightly below the previous month's record and well above forecast.

That took borrowing for the financial year so far to just over 70 billion pounds, more than double its level at the same point last year and the worst since records started in 1946.

And next year is likely to get significantly worse.

As it strives to refloat the economy via extra spending and tax cuts, the government has already pencilled in public sector net borrowing of around 120 billion pounds next year and analysts say that figure is likely to climb.

Fourth GDP data on Friday are expected to confirm Britain is in recession.

JOBS GLOOM

Labour market figures confirmed an ongoing flood of redundancies as banks pull credit lines, forcing firms to take dramatic cost saving measures.

The internationally comparable ILO measure of unemployment, which includes those seeking work but not claiming benefit, rose to 1.923 million, the highest since September 1997, just after the ruling Labour party took office.

The rate nudged up to 6.1 percent in the three months to November, its highest rate since the three months to April 1999, from 6.0 percent a month earlier.

"The rise in unemployment is absolutely awful," said Philip Shaw, economist at Investec. "There's little doubt whatsoever that the labour market is loosening, and loosening very quickly."

The number of Britons out of work and claiming benefit rose for an 11th consecutive month in December. The jump of 77,900 was slightly less than analysts had forecast but took the number to 1.157 million, the highest in over eight years.

British gross mortgage lending fell 47 percent on the year in December to reach its lowest monthly level since April 2001, the Council of Mortgage Lenders said.