.
Businesses predict 3m jobless and borrowing up to pounds 111bn
'Prolonged and painful' recession forecast: Sluggish recovery only expected in 2010.
The Guardian
Nov 15, 2008 p6
Byline: Mark Milner and Julia Kollewe
Britain is heading for a "prolonged and painful" recession which could see unemployment climb to 3 million and government borrowing soar to pounds 111bn, according to an influential business group.
The British Chambers of Commerce's latest quarterly economic forecast, published today, predicts that the most likely outlook is for five-quarters of negative growth and sluggish recovery in 2010. "Britain is facing an extraordinary period in its economic history. Current circumstances are unique and the global credit crisis is entering a critical phase," the BCC's director general, David Frost, said.
The gloomy assessment comes at the end of a week which has seen a raft of companies announce redundancy programmes involving the loss of around 20,000 jobs. Yesterday the RBS, Clydesdale and Yorkshire banks and the van maker LDV became the latest to lay off workers. The number of bankruptcies is also climbing. Figures from the Ministry of Justice showed a 7% increase in the number of individuals in England and Wales declaring themselves bankrupt and a 13% increase in the number of companies seeking winding up orders.
The TUC general secretary, Brendan Barber, said: "This has been the week when the credit crunch started to bite the real economy with job losses and redundancies coming thick and fast every day. The government now needs to be as bold in tackling unemployment as it has been in preventing a financial meltdown."
Unemployment could peak at 3.25 million - more than 10% of the workforce - if the measures were inadequate, the BCC warned. Even if the government delivered an expected stimulus package of around pounds 18bn, public borrowing could reach pounds 111bn in 2009/10 - a "huge deficit which entails serious risks for the UK".
The BCC's chief economist, David Kern, said: "UK public finances are in a dreadful state. Public sector net borrowing will inevitably balloon in the short term."
The BCC expects consumer price inflation to be below 1% by this time next year and for the UK to experience deflation.
It expects the Bank of England's monetary policy committee to cut interest rates to 2% in the next month or two and that rates could be down to 1% or 1.5% by the middle of 2009, if the recession deepens.
Kern said it was vital that monetary and fiscal policy were run in tandem and that the measures to boost the economy should be focused on tax cuts. "If the government's fiscal stimulus is inadequate, or lacks credibility, the UK recession will be worse. If the markets interpret the UK measures as being reckless, the pound may plummet to dangerous lows . . . forcing the government to change course, frustrating its policy aims."
As the job losses began to bite across Britain, Birmingham-based LDV, which makes about 10,000 vehicles a year, said it intended to shed 95 full-time manufacturing posts due to falling demand, particularly in Russia and eastern Europe. A spokesman for the company, which is owned by the Russian oligarch Oleg Deripaska, said the cuts at Washwood Heath, were a direct consequence of a worldwide drop in sales of its Maxus model.
The downbeat news from the UK was mirrored in continental Europe, where the eurozone is now officially in recession, mainly due to a slump in Germany, Europe's biggest economy, and Italy, the third biggest. European car sales fell for the sixth month running, by 14.5%.
The economies of the 15 countries using the euro shrank by 0.2% between July and September compared with the previous quarter, according to figures from the European Union's statistics office, Eurostat, following a 0.2% contraction in the previous quarter.
Germany and Italy have slipped into recession, but France, the euro-zone's second-biggest economy, has surprisingly bucked the trend, showing 0.1% growth between July and September. Spain, fourth biggest, shrank by 0.2%. The figures bring annual growth in the eurozone to 0.7% - half that of three months ago, according to Eurostat. The downturn has reduced demand for oil, pushing inflation lower. Eurostat reported inflation was zero on a monthly basis in October, with the annual rate slowing to 3.2% from 3.6% in September.
"We expect eurozone GDP to grow by just 1% overall in 2008 and then to contract by 0.5% in 2009 as it is hit by sharply weaker global growth, extended financial sector problems, rising unemployment and very weak business and consumer confidence," warned Howard Archer of Global Insight. "It will take time for lower oil prices, the retreat of the euro, lower interest rates and fiscal stimulus in a number of countries to generate recovery."
Businesses predict 3m jobless and borrowing up to pounds 111bn
'Prolonged and painful' recession forecast: Sluggish recovery only expected in 2010.
The Guardian
Nov 15, 2008 p6
Byline: Mark Milner and Julia Kollewe
Britain is heading for a "prolonged and painful" recession which could see unemployment climb to 3 million and government borrowing soar to pounds 111bn, according to an influential business group.
The British Chambers of Commerce's latest quarterly economic forecast, published today, predicts that the most likely outlook is for five-quarters of negative growth and sluggish recovery in 2010. "Britain is facing an extraordinary period in its economic history. Current circumstances are unique and the global credit crisis is entering a critical phase," the BCC's director general, David Frost, said.
The gloomy assessment comes at the end of a week which has seen a raft of companies announce redundancy programmes involving the loss of around 20,000 jobs. Yesterday the RBS, Clydesdale and Yorkshire banks and the van maker LDV became the latest to lay off workers. The number of bankruptcies is also climbing. Figures from the Ministry of Justice showed a 7% increase in the number of individuals in England and Wales declaring themselves bankrupt and a 13% increase in the number of companies seeking winding up orders.
The TUC general secretary, Brendan Barber, said: "This has been the week when the credit crunch started to bite the real economy with job losses and redundancies coming thick and fast every day. The government now needs to be as bold in tackling unemployment as it has been in preventing a financial meltdown."
Unemployment could peak at 3.25 million - more than 10% of the workforce - if the measures were inadequate, the BCC warned. Even if the government delivered an expected stimulus package of around pounds 18bn, public borrowing could reach pounds 111bn in 2009/10 - a "huge deficit which entails serious risks for the UK".
The BCC's chief economist, David Kern, said: "UK public finances are in a dreadful state. Public sector net borrowing will inevitably balloon in the short term."
The BCC expects consumer price inflation to be below 1% by this time next year and for the UK to experience deflation.
It expects the Bank of England's monetary policy committee to cut interest rates to 2% in the next month or two and that rates could be down to 1% or 1.5% by the middle of 2009, if the recession deepens.
Kern said it was vital that monetary and fiscal policy were run in tandem and that the measures to boost the economy should be focused on tax cuts. "If the government's fiscal stimulus is inadequate, or lacks credibility, the UK recession will be worse. If the markets interpret the UK measures as being reckless, the pound may plummet to dangerous lows . . . forcing the government to change course, frustrating its policy aims."
As the job losses began to bite across Britain, Birmingham-based LDV, which makes about 10,000 vehicles a year, said it intended to shed 95 full-time manufacturing posts due to falling demand, particularly in Russia and eastern Europe. A spokesman for the company, which is owned by the Russian oligarch Oleg Deripaska, said the cuts at Washwood Heath, were a direct consequence of a worldwide drop in sales of its Maxus model.
The downbeat news from the UK was mirrored in continental Europe, where the eurozone is now officially in recession, mainly due to a slump in Germany, Europe's biggest economy, and Italy, the third biggest. European car sales fell for the sixth month running, by 14.5%.
The economies of the 15 countries using the euro shrank by 0.2% between July and September compared with the previous quarter, according to figures from the European Union's statistics office, Eurostat, following a 0.2% contraction in the previous quarter.
Germany and Italy have slipped into recession, but France, the euro-zone's second-biggest economy, has surprisingly bucked the trend, showing 0.1% growth between July and September. Spain, fourth biggest, shrank by 0.2%. The figures bring annual growth in the eurozone to 0.7% - half that of three months ago, according to Eurostat. The downturn has reduced demand for oil, pushing inflation lower. Eurostat reported inflation was zero on a monthly basis in October, with the annual rate slowing to 3.2% from 3.6% in September.
"We expect eurozone GDP to grow by just 1% overall in 2008 and then to contract by 0.5% in 2009 as it is hit by sharply weaker global growth, extended financial sector problems, rising unemployment and very weak business and consumer confidence," warned Howard Archer of Global Insight. "It will take time for lower oil prices, the retreat of the euro, lower interest rates and fiscal stimulus in a number of countries to generate recovery."
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