The surprise choice to be the first foreign head of the Bank of England has given a bleak assessment of the UK's economic problems.

Mark Carney, 47, currently governor of the Bank of Canada, will take up the job next year.

Yesterday he defended his decision to leave Canada by insisting the health of the UK economy was of global importance, adding the "challenges are greatest there".

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His comment came just hours after he was praised by Chancellor George Osborne as the most impressive central banker of his generation.

The Canadian former Goldman Sachs executive becomes the first foreigner to take the job.

His appointment came as a shock in the City, where it was widely expected the current Bank for England deputy governor Paul Tucker would get the nod. Sir Mervyn King will stay on as governor until his replacement takes over next summer.

The Coalition Government did little to hide its delight at having pulled off what it saw as a headhunting coup.

It was reported last night that Mr Carney had been interviewed by Mr Osborne only a week ago on a flying visit to London at the same time as he formally handed in his application for the job.

In his current role, Mr Carney has been vocal on a number of issues thought to have appealed to UK ministers. These include backing Quantitative Easing (QE) the controversial money printing scheme, and issuing a call for Canadian firms to stop sitting on their money and start investing. But he has also raised eyebrows with other views, including praising the Occupy anti-capitalist movement.

Making the announcement, Mr Osborne said: "Mark Carney is the outstanding candidate to be governor of the Bank of England and help steer Britain through these difficult economic times.

"He is quite simply the best, most experienced and most qualified person in the world to do the job."

He added: "We needed the best – and in Mark Carney we've got it."

In a sign of the Coalition's desire to poach Mr Carney, ministers have accepted that he will not stay for the full eight-year term, instead serving just five years.

He will apply for British citizenship during his time in the UK. His wife, Diana, is British and his children are also UK citizens. He has worked in the UK for more than 10 years.

It is thought he will earn more than Sir Mervyn's current £300,000 salary.

Mr Carney's decision to leave the Bank of Canada halfway through his term is unusual.

He took up his post during the 2008 financial crisis, and was at that time the youngest central bank governor in the G8. Previously he had spent 13 years at investment banking giant Goldman Sachs.

Other candidates were thought to have included Adair Turner, former chairman of the Financial Services Authority, and Sir John Vickers, the former Office of Fair Trading boss who led the Government's review into breaking up the banks.

Philip Shaw, economist at Investec, said the Chancellor "sprang a huge surprise" with the announcement.

He said: "Mark Carney is a surprise choice but he is a highly respected central banker."

The appointment was welcomed as a "good choice, good judgment" by Shadow Chancellor Ed Balls.

But the TUC's general secretary Brendan Barber said: "The new governor has a job the Chancellor has made close to impossible. Government policies of austerity have sent the economy back into recession and threaten a lost decade of stagnation."

Earlier this year Mr Carney denied that he was interested in the job.

Asked by journalists whether it was a case of "no or never", he said "both".

Mark Carney may have been the surprise choice but his CV is impeccable.

A former Goldman Sachs banker, he has been governor of the Bank of Canada since 2008. During that time the 47-year-old has been praised for helping the country avoid the worst of the worldwide economic downturn.

He also has strong ties to Britain. Not only is his wife a British citizen, so are his four children, and he himself plans to apply. Born in Canada, he studied at Oxford, as well as at Harvard.