Tuesday, November 18, 2008

UK Economy Will Contract By 1.7% In 2009: Industry Body

Source : The Business Times, November 18, 2008

(LONDON) Britain will suffer its sharpest economic contraction in almost two decades next year and the number of people out of work could rise to nearly three million by 2010, the Confederation of British Industry (CBI) said yesterday.

It said it expects the British economy to contract by 1.7 per cent in 2009 and blamed the fallout from global financial turmoil for the massive revision to the 0.3 per cent growth forecast it had issued in September.

'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,' said John Cridland, CBI deputy director-general. 'The banking system has come under immense strain, sending consumer and business confidence plummeting in its wake.'

The CBI said it expected unemployment to reach two million by the end of this year and rise to 2.88 million, or 9 per cent of the workforce, in 2010 - the year by which the ruling Labour Party must call a general election.

That would be the highest jobless total since the last quarter of 1993. Official figures released last week showed British unemployment rose to its highest since 1997 in the three months to September, with 1.825 million people out of work.

The CBI said a deteriorating labour market and weak consumer confidence would weigh on household spending. It predicted household consumption would contract by 1.8 per cent in 2009. 'This latest forecast shows that 2009 is going to be a very tough year for business, with the sharpest fall in GDP since 1991,' said Ian McCafferty, the CBI's chief economic adviser.

Reduced spending and falling commodity prices will ease price pressures, the CBI said, predicting the inflation rate would fall to 1.7 per cent by the end of next year from 4.2 per cent last quarter. -- Reuters

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