CBI issues recession warning
THE CBI today became the latest group to forecast the UK will slide into a recession this year.
It predicts the economy will shrink by 0.2% between July and September, followed by a further 0.1% decline in the fourth quarter.
It comes after dramatic developments overnight on Wall Street as US investment banking giant Lehman Brothers filed for bankruptcy protection and Merrill Lynch agreed to a takeover from Bank of America.
Lehman Brothers, which employs 25,000 staff across the globe, is the highest profile casualty of the credit crunch so far and is sure to send shocks across world financial markets and knock confidence further.
However in the UK the CBI stressed the downturn would be a “shallow recession”, and not a return to the prolonged early 1990s downturn.
But the organisation also slashed next year’s UK growth forecast by 1%, predicting the economy will grow by a “feeble” 0.3% during the whole of 2009 – the lowest rate since 1992.
And unemployment will also top the two million mark next year, it said, up from 1.67m between April and June. The CBI’s warning – which assumes rates come
down by 0.5% by the year end and the same amount by March – follows similar predictions from the European Commission and Paris-based think tank, the OECD.
The British Chambers of Commerce has also predicted the country will slip into a recession.
CBI director general Richard Lambert blamed the economic woes on consumer spending cutbacks thanks to the sharp rises in fuel and food costs, as well as the troubled housing market which has battered confidence.
He said: “Over the past year our forecasts for economic growth have been shaved lower and lower as the UK economy continues to struggle with the twin impact of higher energy and commodity prices and the credit crunch. Growth in 2009 will be feeble at best.
“Having experienced a rapid loss of momentum in the economy over the first half of 2008, the UK may have entered a mild recession that will hopefully prove short lived. This is not a return to the 1990s, when job cuts and a slump in demand were far more prolonged,” he added.
