By JULIA WERDIGIER

LEEDS, England - Down the road from the train station here sits a gaping hole. It was supposed to be one of the tallest and most stylish apartment buildings in Western Europe, complete with interiors designed by Philippe Starck.
Instead, construction stopped abruptly last month when financing dried up, a casualty of the tight credit markets.
Now the abandoned site is a stark symbol of the collapse of Britain’s building boom and how credit market turmoil spread across the Atlantic Ocean from the United States.
Britons have come to an uncomfortable realization in the last few weeks: after 17 years of uninterrupted growth, the British economy is moving closer to recession, and may already be in one.
Figures released on August 7 by HBOS, Britain’s largest mortgage lender, showed the housing market slump, which has been dragging down consumer confidence, is gathering pace. The average price of a property fell 8.8 percent in the 12 months ended July 31, the biggest drop since the company started tracking prices in 1983. Repossessions, bankruptcies and unemployment, though at relative lows, have started to creep up in the last three months.
The Bank of England, the nation’s central bank, is unable to lower interest rates to keep the economy growing because inflation looms. It left lending rates unchanged at its meeting on August 7.
Now many economists are predicting the situation will drastically deteriorate over the next six months, leaving Britain to face a longer, more painful downturn than the United States.
“The U.S. has seen problems come through earlier and there was more action to lower interest rates than in the U.K., meaning the U.K. will be somewhat slower to recover,” said Ian Harnett, managing director at Absolute Strategy Research in London.
Britain’s economy is in poorer shape than most in Europe, with the exception of Spain and Ireland, because of its heavy reliance on two struggling industries: housing and financial services. At the height of the housing boom, British banks were trying to outdo one another in their willingness to lend while rivals on the Continent were generally more constrained by regulation.
Leeds is among the cities hardest hit. Situated in the northern middle of the country close to Manchester and Liverpool, with a population of almost 450,000, Leeds boomed in the late 1990s when technology and service companies set up shop here to take advantage of cheap rents and proximity to a major university.
Demand for offices and apartments gave rise to a construction boom that made Leeds the fastest growing city in Britain in 2003 and led to the region being christened the Golden Triangle.
Now, many of the city’s office buildings are empty and their glass facades are cluttered with for-sale signs.
Gordon Bell, chief executive of Consumer Credit Counseling Service in Leeds, said calls to his team were up 20 percent in the last three months and would probably rise as personal bankruptcies increased.
That increase will coincide with rising credit costs and rising prices. The average interest rate for a mortgage in Britain rose to 5.8 percent from 5.6 percent in the 12 months that ended in May.
Home repossessions are creeping up and even property prices in London have started to fall .
Shahz Khuram, a 33-year-old taxi driver, is nervous about the $160,000 mortgage on his two-bedroom apartment. The fixed-rate period ends next year and he will have to refinance. “It’s not only the mortgage rates that have gone up. Everything is more expensive. I have friends who are selling their cars to pay their mortgage,” he said.