The UK recession will be ‘deeper and longer’ than first predicted, according to the Confederation of British Industry (CBI).
The CBI has revised its September economic forecast that the economy would grow by 0.3% next year, and has now predicted that it will instead contract by 1.7%.
The business group has also forecast that the recession is likely to last until the end of 2009 and that unemployment will reach 2.9 million by 2010. CBI deputy director–general John Cridland said:
“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,”
“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.” he added
The British Chambers of Commerce (BCC) has also forecast tough economic conditions for 2009, predicting five consecutive quarters of negative growth next year.
BCC chief economic adviser David Kern called the economic climate “exceptionally difficult and frightening”, and said the Government needed to ensure that finance remained accessible to small firms.
“The vital flow of bank finance to businesses is crucial, particularly for smaller firms. If credit markets remain paralysed the Government may have to play a direct role, either in guaranteeing business finance or in providing it directly.”
A BCC spokesman added:
“We would be extremely surprised if there wasn’t another interest rate cut, particularly as inflation is now not the main issue. We would like to see rates of 2.5% by December, and it’s not unlikely that we’ll see 1% or below in 2009.”