CBI: Unemployment to surge to 2 million
The employers’ organisation, the CBI, is forecasting that unemployment in Britain will rise by almost half a million to 2.12 million by the end of 2009, a level not experienced since 1997.
The organisation has revised its previous forecasts and said that Britain is already in, or about to enter, a recession and a recovery will not be seen until the middle of 2009.
A country is considered to be in recession when it experiences two consecutive quarters of declining economic output.
Meanwhile, the CBI also believes that house prices will continue to fall heaping more misery onto homeowners.
As a consequence, the weak economic situation will result in hundreds of thousands of job losses by the end of next year, taking the rate of unemployment up from 5.4% to 6.8%.
The CBI estimates that the economy will contract by 0.2% between July and September, and then by 0.1% from October to December. For next year, the organisation is forecasting that the economy will grow at a rate of 0.3% – the worst performance since 1992.
There have been similar warnings from the British Chambers of Commerce and the European Commission.
According to Richard Lambert, CBI director general, a severe rise in energy and food costs are to blame for the recession, as well as the slowdown in the housing market, both have knocked consumer confidence.
Meanwhile, inflation hit a record high of 4.4% in July and is now at its highest level since current records began in 1997. It is also more than double the target of 2%.
The CBI said inflation should hit a high of 4.8% this quarter but expects it to fall back significantly over 2009 as energy and other commodity prices fall.