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CBI expects unemployment and inflation to rise

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by Kay Mitchell

The Confederation of British Industry (CBI), has today warned of a grim outlook for the UK economy.

The business lobby group said inflation will remain stubbornly high and economic growth will be sluggish.

It is forecasting a further rise in unemployment, with the jobless rate rising to 8.4% this year, from 7.9% at the end of 2010.

The group said private sector recruitment will struggle to offset the mammoth job losses within the public sector.

Many experts have suggested economic growth will slow significantly as a result of the Government’s spending cuts.

The CBI is forecasting growth of 1.8% this year and 2.3% in 2012 – however, this is lower than the Office for Budget Responsibility’s 2.1% and 2.6%.

Meanwhile, the CBI said inflation will hit the 4% mark – double the target of 2%. Inflation is expected to continue to rise as a result of last month’s VAT hike.

However, many business groups have said inflation will return to its target by 2012.

Meanwhile, the CBI is not expecting a double-dip recession – despite the economy contracting in the first quarter.

It also expects the Bank of England to begin lifting interest rates in the second quarter and expects rates to be at 1.25% by the end of the year. Rates currently stand at 0.5% – where they have been since March 2009.

The CBI’s forecasts are broadly in line with recent projections from influential think tank, the National Institute for Economic and Social Research (NIESR).

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News posted: February 9, 2011

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