The Confederation of British Industry has voiced its revised predictions for UK GDP in 2009 – a 1.7 per cent contraction and up to three million unemployed.
The forecast released today follows reports across industry that almost unanimously concurred of a bleak quarter three when the country officially fell into recession. In September the CBI’s prediction for next year was 0.3 per cent growth.
John Cridland, CBI Deputy Director-General, said: “Since our last forecast was published in September the banking system has come under immense strain, sending consumer and business confidence plummeting in its wake.
“Given the speed and force at which the downturn has hit the economy, we have reassessed and downgraded our expectations for UK economic growth. But the fast-moving and global nature of this crisis means it is impossible to look far ahead with any certainty.
“What is clear is that the short and shallow recession we had hoped for a matter of months ago is now likely to be deeper and longer lasting. An unwelcome consequence of the downturn will be a significant loss of jobs, many of them in sectors that have been relatively insulated until now.”
The CBI said it now doesn’t expect a recovery to begin until mid 2010 when nine per cent of the population eligible to work – 2.9 million – will be jobless. Up until then the organisation said it expects public borrowing to rocket upwards and investments to dwindle. In the former, net borrowing will hit £69.9 billion in 2008/9 and climb as high as £93.8 billion in 2009/10. For the latter, fixed investments will be down by 10.5 per cent in 2009.
Ian McCafferty, CBI Chief Economic Adviser, said: “This latest forecast shows that 2009 is going to be a very tough year for business, with the sharpest fall in GDP since 1991.
“Most worrying are the increasing signs that the credit crunch is now reaching the corporate sector. Since October’s financial turmoil, companies have started to report that, for the first time, they are finding it increasingly difficult to access capital. If this were to be more than a temporary phenomenon, it would result in otherwise healthy companies going to the wall for lack of short term finance. This would have serious implications for both employment and investment.”
The CBI said that a drop in inflationary pressure meant there was no reason for the Bank of England to pull the base rate down to as low as 1.5 per cent over the next six months. This would follow the one and a half per cent slash it made to bring it down to 3 per cent – its lowest level in over half a century – earlier this month.