UK business should brace itself for more job losses after the British Chambers of Commerce (BCC) revised its forecast for unemployment levels over the next year.
According to the BCC’s latest economic forecast, the country’s unemployment rate could reach 2.65 million at the beginning of 2012, rather than the previously expected level of 2.6 million.
With just over two weeks until the Budget, the BCC forecast reduces expectations for UK GDP growth in 2011 to 1.4% (from the December forecast of 1.9%), but raises its prediction for 2012 growth to 2.3% (from 2.1%).
Two main factors account for a higher jobless forecast. Firstly, the larger than expected increase in unemployment in the fourth quarter of 2010; and secondly, a significant rise in economic inactivity. An expected interest rate increase as early as May 2011 could also add to the jobless total.
Chief economist at the BCC David Kern added: “We assume rates will be raised gradually, to 1.25% at the end of 2011 and to 2.5% in the final months of 2012. While such increases in official interest rates will not push the economy into a new recession, they will slow growth and add to the jobless total.”
David Frost, BCC director-general, called on the Government to present a Budget that would help business to thrive.
“We must avoid heaping new regulatory burdens and business taxes on firms at all costs. Measures that damage initiative, enterprise, and innovation should be scrapped. Business is willing and able to drive the recovery. But it can only do so if the Government will back its words with deeds. Without credible growth enhancing policies, there is a clear danger that the recovery will fizzle out.”