CBI predicts a 'tougher' recession

The CBI has said that the economic outlook is bleaker than first estimated, and claimed that Britain is heading towards a recession as bad as the one in 1991.

Revising its economic forecast, the CBI predicted that the downturn will last for most of next year, with GDP growth for 2008 lowered from 1.1 per cent to 0.8 per cent.

Unemployment is estimated to reach the two million mark by the end of this year, and hit almost 2.9 million by 2010.

John Cridland, deputy director general at the CBI, said: "Since our last forecast was published in September, the banking system has come under immense strain, sending consumer and business confidence plummeting in its wake.

"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."

GDP growth for 2009 has been downgraded from 0.3 per cent to a contraction of 1.7 per cent. CPI inflation is also expected to fall from 4.2 per cent this current quarter to 1.7 per cent by the end of next year.

And in terms of public borrowing, the CBI predicts that it will spike, hitting £69.9bn for 2008/9 and rising to £93.8bn for 2009/10.

Regions

Examining the regional effects of the credit crunch, the Local Government Association (LGA) has claimed that it will be the South-East and London that will suffer the most, with two-in-five jobs possibly at risk in the next two years coming from these areas.

In contrast, northern cities are relatively well-equipped to cope with the downturn due to recent growth.

The report also predicted that the construction and manufacturing industries will be the hardest hit by the economic downturn.

LGA chairwoman Margaret Eaton said: "It is clear that a national, one-size-fits-all approach to dealing with the recession simply isn't going to work.

"The research shows that the fastest way to get out of recession is for more decisions about the economy to be taken at the local level, which means councils continuing to work with local people and businesses."