CBI warns chances of recession now 50-50

THE CONFEDERATION of British Industry warned yesterday that there is a 50:50 chance of a recession as it slashed its growth forecasts for the economy and called for a further half-point cut in interest rates.

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."

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
filmPoldark production team claims innocence of viewers' ab frenzy
Life and Style
Google marks the 81st anniversary of the Loch Ness Monster's most famous photograph
techIt's the 81st anniversary of THAT iconic photograph
News
Katie Hopkins makes a living out of courting controversy
people
News
General Election
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Ashdown Group: Head of Client Services - City of London, Old Street

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, int...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders