The UK economy will contract by over 3% over the next year, lobby groups predict.
The Confederation of British Industry (CBI) has predicted that the economy will contract by 3.3%, and unemployment will reach close to 2.9m by the end of 2009.
Its latest economic forecast suggests that GDP growth will be 0.0% in 2010.
Richard Lambert, director general of the CBI said that faced with a global confidence crisis and a rapid fall in demand and credit constraints, UK firms will be forced to scale back investment and cut jobs.
Commenting on the CBI forecast, he said: “Ultimately the severity of this recession will depend on the speedy implementation of the government’s measures to unblock the credit markets and the success of various global stimuli packages in repairing business and consumer confidence.”
It is anticipated businesses will continue to scale back on investment sharply throughout the year. Business investment is expected to shrink by 9.2 per cent in 2009 and 1.7 per cent in 2010.
Recessionary conditions are also expected to combine with the impact of lower energy prices and the recent VAT cut to push CPI inflation to a low of -0.1 per cent in the third quarter of this year. Nominal interest rates are expected to stay at a very low level until the end of 2010.
© Crimson Business Ltd, 2009
