CBI warns chances of recession now 50-50
Friday 27 November 1998
In its latest economic assessment, the employers' organisation painted a much gloomier picture of Britain's prospects than the Chancellor Gordon Brown.
The CBI's warning will be echoed today by the British Chambers of Commerce, which speaks for thousands of small firms across the country. It also wants the Bank of England to cut interest rates again before Christmas. "A further half point cut now is essential to keep recession off the agenda in 1999," said Chris Humphries, director general of the BCC.
Eddie George, Governor of the Bank of England, yesterday fuelled concern about the economy when he said that the UK's record trade deficit, announced on Wednesday, had been "germane" to the Bank's decision to cut interest rates earlier this month. "They [the trade figures] are a reflection of what is happening to external demand," he told MPs at the Treasury Select Committee.
Two of Mr George's colleagues on the Monetary Policy Committee insisted that lower interest rates were necessary to keep the economy on course.
Willem Buiter stood by his decision to vote for a 0.75 point rate cut at the MPC meeting a fortnight ago, while DeAnne Julius admitted that there was a possibility that economic growth could turn negative next year.
However, the Bank Governor gave mixed signals to the MPs, hinting that another cut in rates could be off the agenda until the new year. The Governor said: "The half per cent reduction in rates we made earlier this month we judged to be sufficient to bring retail price inflation back on track to 2 and a half per cent."
The CBI is forecasting that GDP growth will fall to just 0.7 per cent next year and then rise to 1.8 per cent in 2000. This compares with the Chancellor's forecast of 1 to 1.5 per cent growth next year and 2.25 to 2.75 per cent the year after.
Kate Barker, the CBI's chief economic adviser, said there was now at least a 50 per cent chance of a technical recession - two successive quarters of falling output. But she said the dangers of Britain suffering an outright recession of the kind experienced in the early 1990s were much lower.
Three months ago the CBI was forecasting growth of 1.2 per cent next year. But since then the economic situation has deteriorated further. The CBI's latest monthly industrial trends survey shows total order books at their lowest for six years and expectations on output at their lowest since 1991, making a recession in manufacturing increasingly likely.
"We face a major slowdown next year and the risks to growth are clearly on the downside while inflationary risks are slight," said Ms Barker.
"We need a further half-point reduction in interest rates at the MPC's December meeting to underpin consumer and business confidence."
The magicians using online collaboration to push the boundaries
Jennifer Lawrence attacks mass media again over body image
Paris charity auction staged to save the ancient city of Tyre
scienceScientists find the answer to a question that even puzzled Darwin
A very timely Great Train Robbery and a frantic 24 Hours in A&E among the highlights
arts + entsThe 'Friends' actor on his new role as campaigner on addiction issues
Jennifer Lawrence: 'It should be illegal to call someone fat on TV'
Colin Farrell reveals ‘affair’ with Elizabeth Taylor: 'She was my last romantic relationship'
Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
Devyani Khobragade: India-US row escalates over arrest of diplomat in New York
Peter O'Toole: Tales of the late film icon
- 1 America's 'virgin births'? One in 200 mothers 'became pregnant without having sex'
- 2 Sun will 'flip upside down' within weeks, says Nasa
- 4 Christmas comes early: Justin Bieber announces he's 'retiring from music'
- 5 Children evacuated from swimming pool after prosthetic leg mistaken for paedophile
- < Previous
- Next >
iJobs Money & Business
£25000 - £35000 per annum + benefits + bonus: Harrington Starr: Business Analy...
£50000 - £75000 per annum + benefits + bonus: Harrington Starr: Implementation...
£50000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: A leading prov...
Negotiable: Harrington Starr: One of the leading providers of buy side technol...