Unemployment figures indicate recession will be longer and harder

With headlines splashed across UK papers earlier this week that 370,000 jobs in the capital may be lost, unemployment is set to hit almost 2 million by the start of 2009, with the economy contracting by up to 2 percent.

With business conditions and the global financial crisis only getting worse in the short term, the Confederation of British Industry (CBI) posted a very difficult outlook, having had to revise previous estimates made 2 months ago.

It was estimated that the economy would shrink by 0.3 percent, however the forecast was conservative at best and the figure now posted is 1.7 percent. What was read to have been a short and shallow recession is now, according to John Cridland CBI Deputy Director General, going to be deeper and longer lasting.

On a positive note though, inflation is expected to fall by 1.7 percent, so the CBI predicts that it will reach the Bank of England target of 2 percent by 2009, paving the way for further interest rate cuts.

The CBI said that the economy will recede by 0.8 percent from the previous quarter between October and December 2008. Recovery is not expected to start until 2010 and GDP growth for this year has similarly been changed to 0.8% from 1.1% as the economy shrinks.

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