British Chambers of Commerce forecasts gloomy outlook for economy
In its latest quarterly economic forecast, the British Chambers of Commerce (BCC) said the level of UK unemployment is likely to increase, as up to 300,000 workers will lose their jobs by 2011.
According to the leading business group, this will push the number of people out of work close to the 2 million mark.
The group is forecasting that Britain is heading towards recession and added that there was a possibility that the economy would shrink during two quarters before March next year.
Interest rates must be cut in the short-term to help stave off imminent recession, said BCC.
However, the BCC added that a major recession similar to the downturn seen in the early 1990s is unlikely.
It has revised its forecast for economic growth to 1.3% this year and 1.1% next year, down from 1.7% this year and 1.6% in 2009.
Last week, it emerged that the UK’s annual rate of inflation surged to a record high of 4.4% in July. Inflation is now at its highest level since current records began in 1997.
The figure is up from 3.8% in June and is more than double the Government’s target of 2% and above analysts’ forecast of 4.2%.
Hopes of an interest cut in the future are low as the Bank will face an even tougher decision as inflation rises even further, according to economists.
David Kern, economic adviser to the BCC, said threats to growth are more serious and more immediate than the risks of higher inflation. Interest rate cuts are urgently needed to counter threats of recession.
The threat of job losses will undoubtedly heap more misery onto British families already struggling with the rising costs of day-to-day living as food and energy prices continue to soar.
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