The Confederation of British Industry (CBI) has downgraded its growth predictions for 2008 and 2009, following the severe impact on confidence and business activity from the financial turmoil in October.
In its revised economic forecast, the CBI predicts that the recession which started in the third quarter of 2008 will now run for most of 2009 and see unemployment peak close to 2.9 million.
GDP growth for 2008 has been revised down from 1.1 per cent to 0.8 pr cent, and in 2009 the CBI now expects the economy to contract by 1.7 per cent, against its forecast in September of 0.3 per cent growth.
The economy is expected to shrink quarter-on-quarter by 0.8 per cent between October and December this year, and to contract again for a subsequent three quarters before beginning a slow recovery through 2010.
John Cridland, CBI deputy director-general, said: “Since our last forecast was published in September the banking system has come under immense strain, sending consumer and business confidence plummeting in its wake.
“What is clear is that the short and shallow recession we had hoped for a matter of months ago is now likely to be deeper and longer lasting.'