Unemployment will rise next year rather than falling, as previously thought, according the CBI.
The employers’ group today downgraded its forecast for economic growth in 2008 due to the credit crunch and high oil prices.
It said that the number of jobless people in the UK would rise to 1.7 million next year – and 1.75 million in 2009.
There were 1.64 million people unemployed in November 2007, and the CBI previously said this number would fall next year.
Ian McCafferty, CBI chief economic adviser, said: “While the 2008 slowdown may appear dramatic set against this year’s strong growth, the fundamentals of our economy remain sound, and talk of a full-blown recession is overstated.
“Uncertainty surrounds the extent to which current credit conditions will affect both business and consumer confidence and how far the property markets will suffer. Borrowing conditions are already tighter for some households and businesses.
“Another key factor is the price of oil, which has risen by 20% since September. A prolonged period of high oil prices will add to inflationary pressures, while putting a squeeze on profits and discretionary spending, compounding the slowdown.”
Average earnings growth is forecast to remain at 4.0% next year before weakening slightly to 3.9% in 2009.