Govt ‘to borrow £317bn over two years’

By staff

The government will borrow £317 billion over the next two years as it contends with a 3.3 per cent retraction in the economy in 2009, the CBI has claimed.

According to the Confederation of British Industry (CBI), which has revised its forecast for the slowdown in the economy from 1.7 per cent, unemployment will hit 2.9 million this year.

In its latest economic forecast the business group predicts the government will be forced to borrow £149 billion in 2009/10 and £168 billion in 2010/11, compared to the government’s own forecast of £118 billion and £105 billion respectively.

“The crisis of confidence caused by last October’s financial turmoil resulted in a sharp and sudden fall in global output, including across the emerging economies,” said Ian McCafferty, CBI chief economic advisor.

“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 and accompanied by a significant rise in unemployment.”

Mr McCafferty added that the “most urgent requirement” for the government was getting credit support schemes in place.

“If we can get credit flowing across the economy, the considerable monetary and fiscal stimuli already in the pipeline should start to feed through later in the year and provide the pre-conditions for an eventual recovery through 2010,” he predicted.