The CBI: recession and job cuts on the way

The CBI predicts recession and rising unemployment - just the news to kick-start the week.

Last Updated: 31 Aug 2010

Richard Lambert, the CBI's director-general, has announced that ‘we are now almost certainly in a mild recessionary phase'. That's a very diplomatic answer to the country continually asking ‘are we there yet?'. The employers' organisation laid the blame at the familiar feet of the credit crunch, soaring commodity prices and the housing downturn, a combination that it says will drive the ailing UK economy into recession in the second half of the year (marking a u-turn on its ‘no recession' prediction earlier this year) and push the jobless figures to over two million.

The UK economy has already slowed dramatically in the first half of this year, and the CBI is describing growth next year as ‘feeble at best'. That sounds encouraging. It has cut its growth predictions from 1.7% to 1.1% in 2008 and from 1.3% to a mere 0.3% in 2009. It expects output in the economy to shrink by 0.2% between July and September, and by a further 0.1% in the final quarter of the year.

To put it into context, this will be the first recession since 1992, with a raft of job cuts pushing unemployment figures up 450,000 to 2.12m by the end of 2009 - the highest level since 1997, when Labour came to power. That's an unemployment rate of 6.8%. And the CBI adds salt to the already sensitive wounds by adding that homeowners will continue to suffer brutal falls in property values.

The CBI also forecasts that the Government will break one of its fiscal rules: government borrowing is set to rise, pushing public net debt to more than 40% of GDP. On top of everything else, that's hardly the news people want to hear. Especially when banks are falling left, right and centre due to irresponsible lending.

Still, the CBI's interpretation did contain a rare glimmer of the upbeat - it reckons the recession will be relatively shortlived. It predicts the economy will nurse itself back to some semblance of health by the middle of next year. And given the events unfolding now on Wall Street, an awful lot of people will be delighted if the recession only lasts a year.

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