Recession to be worse than 90s slump
The current recession is expected to be worse than the economic slump of the 1990s, the British Chambers of Commerce (BCC) has warned.
The BCC’s quarterly economic survey has predicted that UK GDP is expected to decline by 2.9% between the third quarter of 2008 and the third quarter of 2009. This would be greater than the 2.5% drop between 1992 and 1993.
The survey also forecast that the UK economy would contract by 2.2% in 2009 — worse than the 1.6% negative growth it predicted last November. BCC director general David Frost said:
“Some of the strain can be avoided, but only if the Government can address the two key problems of confidence and cashflow. We must avoid losing viable companies during this downturn.”
“It will be business that drives the UK out of this economic downturn. Businesses feed into the local economy by keeping people in employment, providing essential goods and services, and investing in local projects.”
“Small firms should concentrate on their cashflow. They should consider closing weaker sites or stores if they have more than one, or cutting other costs. If a business doesn’t have its cashflow under control it’s in trouble.” continued Frost.
The Centre for Economics and Business Research (CEBR) warned that the UK economy is set for its largest fall in a single year since 1946. CEBR economist Charles Davis said:
“2009 is where we are likely to see the real economic pain, with output falling by 1.3% in the second quarter and a full year contraction of 2.9%,” .
“The economy is facing a painful readjustment away from debt from external financing that has allowed a huge gap between UK bank lending and deposits to open up. With bank lending not returning to anything approaching normality until mid–2010, investment will fall by 15.2% in 2009.”
According to the CEBR, the other main cause of the slowdown is a fall in consumer spending, caused by rising unemployment, sluggish earnings growth and constrained bank lending.