British employers warn of long and deep recession
British employers warn of long and deep recession
UK's domestic economy contracted by 0.5 per cent last quarter.

London: Britain is facing a deeper and longer recession than previously thought, the country's major employers' federation said on Monday.

The Confederation of British Industry, or CBI, said it expected the economy to contract by 1.7 per cent in 2009. In September, it forecast a shallow recession in late 2008 followed by 0.3 per cent growth next year.

"The recession here in the UK looks to be deeper and longer lasting than we predicted only two months ago," said John Cridland, the confederation's director-general.

According to official statistics, the domestic economy contracted by 0.5 per cent last quarter. Another negative number in the current quarter, which is widely expected, would put the economy in a technical recession, defined as two straight quarters of negative growth.

The Bank of England predicted last week the British economy could shrink by as much as 2 percent over the next year.

The CBI said it was likely the central bank would cut interest rates again next month in a bid to stimulate the economy. The central bank slashed its base rate by a whopping 1.5 percentage points to 3 per cent this month in an attempt to shore up the economy as it sinks into recession.

"In terms of December, I think there is a very high possibility that they will cut again. I would expect it to be between a quarter and half a per cent," said Ian McCafferty, the confederation's chief economic adviser.

The group predicted rising unemployment would peak at around 2.9 million in 2010. The number of unemployed people in Britain is now 1.82 million, the highest level in a decade.

The CBI said inflation would likely fall to 1.7 per cent by the end of 2009, below the Bank of England's 2 per cent target, and sink to 1.1 per cent in 2010.

The government has promised to increase public spending and hinted it might cut taxes to stimulate the economy. It has pumped 37 billion pounds ($55 billion) into the country's wobbling banks to prevent an all-out collapse of the sector.

Cridland said "the jury is still out on whether all the government interventions so far will be enough to stabilize the financial sector."

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