Britain will have to borrow more than £168 billion (US$239 billion) — almost 12 percent of national income — as it tries to bring the recession under control, a major business lobby predicted yesterday.
In the latest grim forecast for recession-hit Britain, the CBI business group also believes the economy will shrink by 3.3 percent this year, far more than its forecast of 1.7 percent made in November, and not recover until next year.
Government borrowing to increase public spending will jump from £88.7 billion last year to £148.7 billion this year, or 10.6 percent of GDP, the CBI said.
By next year, it would hit £168.1 billion (11.8 percent) — putting the public finances in the worst state since the end of World War II, the Financial Times business daily said.
“You would have to go back a long way before you found a deficit as high as 10 percent of GDP,” said CBI chief economic adviser Ian McCafferty.
The figures are far worse than laid out in Chancellor of the Exchequer Alistair Darling’s preliminary budgetary report in November, when he forecast borrowing of £118 billion for this year, and a fall to £105 billion next year.
McCafferty blamed a “dramatic and global change in conditions” in recent weeks for the worsening outlook. Darling also said he expected growth to resume by the middle of this year, but the CBI does not expect recovery until next year.
“Given the rapid contraction in global economic activity and the continuing credit squeeze, we believe the UK will be mired in a deep recession for the whole of 2009, lasting six quarters in total,” McCafferty said.
This would be accompanied by a “significant rise” in unemployment to just over three million by early next year, the CBI said. The latest official figures put joblessness at 1.97 million, or 6.3 percent, in the three months to December.