When George Osborne met Christine Lagarde: US and eurozone weakness could hit UK warns Chancellor as IMF chief visits London

The Chancellor, George Osborne, greeted the managing director of the International Monetary Fund, Christine Lagarde, at 11 Downing Street yesterday.

Ms Lagarde issued a warning in the Richard Dimbleby lecture earlier this week over rising income inequality around the world and said competition between states to lower corporation tax rates was exacerbating the problem.

Meanwhile, Mr Osborne has identified economic weakness in America and Europe as a potential threat to the UK's recovery.

Speaking to the House of Lords Economic Affairs Committee, the Chancellor singled out economic risks emanating from abroad, and said: "I would draw your attention to the weakness of some of the eurozone economies, which remains a cause of concern, and some of the US data in the last couple of weeks, which has been a bit soft."

The British economy grew by 1.9 per cent in 2013, its fastest rate of growth since 2007, and a further 2.7 per cent expansion is forecast this year. The eurozone emerged from its double dip recession last year, but unemployment in the bloc remains painfully high at 12 per cent. Growth is projected at just 1.1 per cent in 2014.

The US grew at an annualised rate of 3.2 per cent in the final quarter of last year, but amid concerns about the impact of the Federal Reserve's "taper" of its asset purchases. America's ISM manufacturing index dropped to an eight-month low of 51.3 in January, still above the 50 point that indicates growth, but well below expectations.

The US economy only created 74,000 jobs in December, against the previous four-month average of 214,000.

Andy Haldane, the Bank of England's executive director of financial stability, also issued a warning yesterday over recent financial shocks in emerging markets. "Individual countries act in their own best interests without taking into account the broader best interest of the financial system as a whole," he said in a speech at Oxford University. "What is going on with the head-to-head combat is people pursuing policies of individual countries. What is at stake is the system as a whole."

The latest Markit survey of the UK's construction sector yesterday showed activity hit its highest level since August 2007 in January. Its construction purchasing managers' index rose to 64.6 in January, up from 62.1 the previous month.