Article
Unemployment will soar above 3 million in 2009, say chambers of commerce
Unemployment will soar above 3 million as Britain's manufacturers, retailers and service industries feel the full effects of the downturn, according to the British Chambers of Commerce, which said economic output is set to fall this year by more than in the last recession of the 1990s.
The jobless count will rise to 3.1 million, or 10% of the workforce, the business group predicted. It said the UK economy could shrink by as much as 2.9%, leaving the country to face the "distinct risk" of deflation this year. As a result, the government's depleted finances will remain in a parlous state for many years.
The BCC's gloomy forecast was matched by analysis from Experian that predicted that up to 1,400 retailers would be forced out of business over the coming year. The retail consultancy said there was no disguising that 2008 was "an annus horribilis" for the retail sector and there was little prospect of improvement in 2009.
A last-minute dash to the shops at Christmas failed to lift footfall figures to last year's level, Experian said. Shopper numbers were 3.1% lower in December than they had been in the same month of 2007, despite heavy discounting that in many cases wiped out profit margins.
Experian said there had been a 21% year-on-year jump in the number of retail insolvencies, with high-profile casualties such as Woolworths, Adams and Zavvi all calling in the administrators. It predicted a further 440 retail businesses would fail in the first four months of 2009, with a total of 1,400 going under in the year as a whole.
Economists lined up to support the view that 2009 would be one of the worst years for the economy and could trigger a longer-than-predicted slump in national output.
Howard Archer, of Global Insight, said the economy would contract by 2.7% as the effects of the banking crisis gripped the real economy.
"Consumer spending is being hammered by accelerating unemployment, muted income growth, high utility bills and food prices, very tight lending practices, heightened debt levels, a depressed housing market and substantially lower equity prices," he said. "Additionally, heightened concerns about the economic outlook are leading consumers to tighten their belts.
"The Bank of England's cutting of interest rates by a total of 300 basis points between October and December, and undoubtedly more reductions to come, will obviously help consumers, as will some of the measures contained in the government's £20bn stimulative fiscal package announced in November's pre-budget report. Nevertheless, consumers will face serious pressures for an extended period, and will be particularly hit by sharply rising unemployment in 2009. Consequently, we expect consumer spending to contract by around 2% in real terms in 2009."
Archer predicted house prices would fall another 15%, while Capital Economics said it could be as much as 20% as the cost of the average home headed for a 50% fall from its peak in the summer of 2007.
The BCC said it believed there was a risk of deflation in the second half of this year, while government borrowing would increase to £130bn.
David Frost, BCC director general, said: "I have worked through three recessions now and 2009 looks like it will be one of the toughest years I have ever seen for the UK.
"Some of the strain can be avoided, but only if the government can address the two key problems of confidence and cash flow. We must avoid losing viable companies during this downturn."
David Kern, chief economist at the BCC, added that the UK's prospects had worsened significantly since the group's last forecast at the end of 2008. The BCC was now predicting bigger declines in economic output, higher unemployment and larger government borrowing than envisaged in November.
Unpredictable 2008
Last year most City analysts were wrong on house price inflation, wrong on unemployment, wrong on interest rates and wrong on the severity and depth of the recession in 2008.
To be fair, most of them were near the mark until the Lehman Brothers collapsed. As the governor of the Bank of England, Mervyn King, said, Lehmans changed everything. King, who was also wrong-footed by events, was predicting until the summer that the UK economy was robust and all we needed to worry about was inflation.
In January last year the CBI believed the growth in national income for 2008 would be 2%. Today, GDP growth looks more like being 0.8%.
The Royal Institution of Chartered Surveyors suggested that 2008 would be a game of two halves for the property market. It said house prices will would end the year broadly unchanged as first-time buyers buoyed the market. Instead, we had the sharpest decline in house prices since the 1970s.
Most economists opted for predicted that base rates at the end of the year of would be 4% to 4.5%. Roger Bootle, economic adviser to Deloitte & Touche, picked 4%, while David Brown at the soon-to-go-bust Bear Stearns, said: "UK rates should be at 4.5% by the end of 2008." Now they stand at 2% and with will fall further, to fall according to many experts.
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User Comments
AnimalFacedHam
2 January 2009 9:36AM
Sorry to be so ridiculously simplistic about this but if your year 2007 was 100% great and your year 2008 was only 95% great .... it's still a pretty good year isn't it?
Is the economy so finely balanced that a few percentage points either way can turn everything into doom and gloom?
booker
2 January 2009 9:47AM
It is sickening to think that the government did not realise that they would have to bail out the other casualties of the banking crisis, they bailed out the banks but forgot about the people behind and in front of the tills.
Kess
2 January 2009 11:09AM
What's the betting that the bulk of these losses will be among the most productive staff, while the less vital (but more self-important) people - all those layers of managers, administrators, PR executives, jobsworths, strategic co-ordinators etc. - carry on regardless?
b4uvotemcronereport
2 January 2009 11:32AM
This comment was removed by a moderator because it didn't abide by our community standards. Replies may also be deleted. For more detail see our FAQs.
mong123
2 January 2009 12:01PM
You can't be trusted. You'll just waste it all on smack and alcohol. Fine, declare your independance and break yourselves off into the North Sea.
The Romans had the right idea...
nochiphere
2 January 2009 12:14PM
You can't be trusted. You'll just waste it all on smack and alcohol.
I'm going to guess you live south of the border !.
maccamcmahon
2 January 2009 1:12PM
If Scottish financial management is exemplified by Gordon Brown then you definitely cannot be trusted
thomas1972
2 January 2009 1:34PM
British knowledge and British investment created 'Scotlands Oil Industry'. As Scots make up 10% of the population you can have 10% of the UK's oil reserve if you declare independence.
By doing you will also cut yourself off from the City of London thereby committing economic suicide in the process. And with no English to by your produce I reckon Scotland would soon return to the state it was in before the Act of Union - a bankrupt boil on England's backside!
lynxeffect
2 January 2009 3:01PM
Most of the North Sea Oil belongs to England. When working out who gets the coastal waters you follow the line of the border out into the sea. The English/Scottish border stretches upwards to include the oil areas.
Nice try though.
PeterParker
2 January 2009 4:43PM
maccamcmahon
02 Jan 09, 1:12pm (about 3 hours ago)
If Scottish financial management is exemplified by Gordon Brown then you definitely cannot be trusted
Now that's gotta hurt!
b4uvotemcronereport
2 January 2009 5:09PM
lynxeffect
Yes in 1999 Tony Blair and the Labour Government
STOLE 6,000 MILES OF SCOTLAND'S SEA
When they Secretly moved Scotland's Marine Boundaries from Berwick-upon-Tweed to Carnoustie. Illegally making 6000 miles of Scotland's waters English.
So now when you play golf at St Andrews and look out to sea, you are looking at English Waters according to the treacherous Westminster powers that be.
http://www.oilofscotland.org/scottish_politics.html#Scotlands_marine_boundries
For more on the positive politics the Labour Party inflict upon the Scottish people Just visit
2bapilgrim
2 January 2009 5:36PM
EDITORIAL. Your introductory on the main news page says 'one in 10 to lose jobs in 2009'. Actual story says unemployment will rise to 3.1m in 2009, which is one in 10 of the work force. Not the same thing at all. Simple mistake of the kind that should never happen or stupid attempt to draw in more readers?
b4uvotemcronereport
2 January 2009 5:37PM
thomas1972
Yes when another Labour Administration just about bankrupt in the late 60 's and early 70's Scotland's North Sea Oil saved the UK. Yes American and Scottish and English Knowledge built the North Sea and the Loan the UK Government had to get paid for the investment in the North Sea.
I Scotland the only Country in the World to strike oil and get poorer - had not stuck oil the UK would have been a bad investment and would not have been trusted with a loan
We are now coming to the end of yet another Labour Administration and the country is once again not in a good condition.
Scotland without London filtering it's wealth would be good for Scotland. Read the Mc Crone report for the effect Scottish Oil controlled by Scotland would have. As there is another 30+ years of Oil and a new massive field just been discovered in Rockall, the future could be very different for the 5 Million Scottish Residents as they could each retain the £234,000 of wealth that could be coming their way if they vote for Independence in 2010.
b4uvotemcronereport
2 January 2009 5:40PM
mong123
It is not a matter of whether a Westminster political party leans to the left or to the right; it is a matter of; to which country, the government of this political party belongs.
If a government belongs to any other country, other than it's own, then that government will always rule that other country's for it's own political and financial advantage. This will always mean to our disadvantage i.e. Oppression.
Surely, the obvious answer to this situation is for the people of Scotland to vote for the government of Scotland, not another country, to rule Scotland.
This situation has allowed the www.scottish-labour-party.co.uk to do nothing for Scotland and allow areas like the East End of Glasgow have the worst poverty in Europe.
b4uvotemcronereport
2 January 2009 5:44PM
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Benjine
2 January 2009 6:31PM
@b4uvotemcronereport
All very interesting this Oil of Scotland business but isn't it off topic sir? I understand you feel passionately about the issue but perhaps you need to wait for a thread which discusses Scotland specifically, Scottish Independence, SNP & Labour politics/ The West Lothian question/ Nationalism/ Regionalism/ Scottish poverty/ Peak Oil/ Inequitable oil distribution in the UK etc etc before posting so voluminously on the topic.
As for Scottish independence, MHO is that if the Scottish people want it and vote for it then they should have it. Personally I'd be sorry to see the Union go but I accept people's desire and right to self-determination in the running of their own affairs.
(Spoken as a true Englishman with a deep and abiding love of Scotland.)
Benjine
2 January 2009 6:38PM
@Thomas1972
By doing you will also cut yourself off from the City of London thereby committing economic suicide in the process.
I'm not sure this is a comment - especially right now - that would win you many arguments in Scotland Thomas! Ditto for England, Wales & Northern Ireland. I'm sure that many of us in the "real England" (a la Palin) would be glad to be shot of the shysters in the City. We might not be in such a mess were it not for them.
And with no English to by your produce I reckon Scotland would soon return to the state it was in before the Act of Union - a bankrupt boil on England's backside!
I don't imagine the SNP are intending to raise trade barriers against the English were they to achieve independence one day. Or are they? In a free trading area the english would continue to buy scottish goods and services just as before. Perhaps b4uvotemcronereport can enlighten us? !
PeterParker
2 January 2009 10:24PM
b4uvotemcronereport
02 Jan 09, 5:37pm (about 5 hours ago)
the future could be very different for the 5 Million Scottish Residents as they could each retain the £234,000 of wealth that could be coming their way if they vote for Independence in 2010
Now that really does sound like propaganda.
Generally speaking, the ordinary public don't benefit (except those who work in oil industry and its spin-offs) from oil revenue. It gets soaked up by governments (through high taxes) and massive oil companies.
Great if you are a government lackey, or an oil rig workers, but for your average Scot on the street, it won't make that much difference, particulary as it will run out pretty soon.
Saying that, as English taxpayers help fund "free" Scottish higher education, "free" prescriptions and "free" hospital car parking spaces, I shouldn't be defending the break-up of the "Union".
Be careful what you wish for.
Live long...
BrotherGorilla
2 January 2009 8:35AM
'The jobless count will rise to 3.1 million, or 10% of the workforce'
Is this why the charming bosses of the rail companies have decided to put up fares by about 6% ?
A board meeting along the lines of;
Fewer people in work..less income...lower bonuses!.....hmm..we'll just have to milk the remaining commuters for the difference...6% oughta do it.
Right now thats over we'll have a spot of lunch!
Or am I being too cynical?