Jeremy Warner: Job losses keep on mounting

Outlook While political leaders chomp their canapés and quaff whatever it is the organisers deem appropriate to serve by way of drink for these straitened times, the news on the real economy gets ever grimmer. Germany was confirmed yesterday as officially in recession, while job losses continue to mount at an alarming pace.

The 10,000 cull announced yesterday by BT was not technically of the recessionary type, in the sense that these are job losses that would have happened anyway as part of ongoing cost-cutting. The bulk of them are in any case agency, or contracted-out workers. Even so, for them, the news is no less bleak. In this environment, they will struggle to find work elsewhere.

The 400 job losses announced by JCB are, on the other hand, directly related to the collapse in demand. Only last month, JCB announced a ground-breaking agreement with its workforce under which employees would work a four-day week at reduced levels of pay to save jobs. Orders have deteriorated so badly since that lay-offs have become unavoidable. Remember, this is not some uncompetitive remnant of Britain's industrial past, but a world-class company producing some of the best heavy-lifting kit on the planet.

Things already look disastrous enough, but there is now every danger of them spiralling out of control with catastrophic results as a phalanx of decent companies go to the wall. The Government appears to have little option but to reflate aggressively and worry about the consequences for public borrowing and taxation later.

The Bank of England has admitted that, with the transmission system of lower interest rates impaired and the banks in deleveraging mode, monetary policy on its own is unlikely to do the trick. Yet eventually, the reflationary medication will have to be paid for with higher taxes, and that's going to make a return to past levels of growth and consumption a very slow and long drawn-out affair. The rapid bounce-back anticipated by the Chancellor and the Bank of England looks like wishful thinking.