Revised forecast shows 9% out of work and interest rates slashed to 1.5%
The UK recession will last most of next year and leave 2.9 million people unemployed, according to the CBI.
The business lobby group has revised its growth predictions for 2008 and 2009 following a gloomy October, and says the recession will be “deeper and longer” than previously thought, with recovery not expected until 2010.
The CBI now says that the economy will contract by as much as 1.7% in 2009, a sea change from its September prediction of 0.3% growth.
It also said that the Bank of England may be forced to put interest rates as low as 1.5%, and that inflation will fall from its current rate of 4.2% to 1.7% by the end of next year.
By the end of 2009, according to the CBI's forecast, unemployment will be as high as 2.9 million, or 9% of the UK workforce.
John Cridland, deputy director-general of the, said: “Given the speed and force at which the downturn has hit the economy, we have reassessed and downgraded our expectations for UK economic growth.
“But the fast-moving and global nature of this crisis means it is impossible to look far ahead with any certainty. 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.”