CBI warns UK in for worst decline in almost 30 years
The Confederation of British Industry (CBI) has warned that the UK economy will contract at nearly double the rate previously forecast this year.
The organisation said that the deteriorating global economy, together with a rise in unemployment and the ongoing difficulties that UK firms are facing in accessing credit will drive the economy deeper into recession this year.
The surge in unemployment and fears over job security will mean Britons will spend less and save more, which will have an impact on spending, said the CBI.
The CBI recently forecasted that unemployment will rise to over the 3 million mark by the second quarter of 2010, up from 1.97 million at the end of 2008.
The CBI said Gross Domestic Product will shrink 3.3%, revised from the 1.7% forecasted in November. As a result, the recession is expected to last for the whole of 2009, the business group said.
It was revealed on 23 January that the UK had officially entered recession after Gross Domestic Product fell by 1.5% in the fourth quarter of last year, following a 0.6% contraction in the three months prior to that.
Many business groups have predicted that this recession will be the worst since World War II as a result of a continued fall in house prices and the global financial crisis.
Meanwhile, the British Chambers of Commerce is urging the Government to implement the various credit support schemes it recently announced.
The news of a prolonged recession resulted in the pound falling against the euro and the dollar. In the last 12 months, Sterling is down 17% against the euro and 28% against the dollar.