CBI forecast: slow growth, price rises, job cuts — but we should avoid a recession

Britons are heading for a miserable cocktail of soaring unemployment and surging inflation as the credit crunch shows no sign of waning, business leaders say today.

The spiraling price of fuel and food will push inflation to a high of 3.8 per cent this year and keep it above 3 per cent for the next ten months, the CBI said in its quarterly economic forecast, published today.

More than 200,000 people will lose their jobs before the end of next year as the economy slows markedly, the CBI said, driving the number of people out of work to a ten-year high of 1.89 million. This is 50,000 more than the CBI forecast in March.

Building trade workers and those in the financial sector were most likely to be axed as the housing market slump and the credit crunch take their toll.

But Ian McCafferty, chief economic adviser at the CBI, said that other workers such as waiters, bar staff and sales assistants were also vulnerable to losing their jobs as hard-pressed consumers cut back their spending.

“It is very much consumer-facing companies who are at the centre of the downturn,” he said. Beleaguered financial and business services companies have already shed more than 20,000 jobs this year. The escalating rate of inflation will force Mervyn King, the Governor of the Bank of England, into the humiliating position of having to write four letters to the Chancellor to explain why inflation has surged far above the Bank’s 2 per cent inflation target.

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Source:
http://business.timesonline.co.uk/tol/business/economics/article4144577.ece