Economic gloom set to dent jobs growth

Uncertainty about growth prospects in the UK and the global economy is affecting the hiring intentions of employers and unemployment looks set to worsen, business groups have warned.

Publishing its latest quarterly economic forecast figures today, the British Chambers of Commerce (BCC) reduced its prediction for UK gross domestic product growth in 2011 and 2012.

It now expects the economy to expand by just 1.1% in 2011, compared with its 1.3% estimate in June, while its forecast for 2012 economic growth is now at 2.1%, down from 2.2%.

The figures have been revised down because growth was lower than expected in the second quarter of 2011 and future expansion will be held back by weaker global growth, fiscal austerity and the relentless squeeze on personal disposable incomes, the BCC said.

Unemployment is also predicted to rise, peaking at 2.62 million in the fourth quarter of 2012. In June 2011, the BCC forecast a slightly lower jobless peak of 2.6 million in the second quarter of 2012.

Gerwyn Davies, public policy adviser at the Charted Institute of Personnel and Development, said: “The BCC is right to increase its unemployment forecast and to predict that unemployment will now peak in the middle of next year.

“It is becoming clear that increasing uncertainty about growth prospects in both the UK and global economies is now affecting hiring intentions; particularly in areas such as manufacturing where prospects were buoyant at the turn of the year.

“Together with the public sector redundancies, which will amount to hundreds of thousands during the lifetime of this Parliament, the medium-term prospects for bringing down unemployment do not look good.”

David Frost, director-general of the BCC, added: “The challenges faced by the UK economy are more difficult than first thought at the beginning of the year. Growth will be slow, inflation will remain high, and the number of those out of work will increase. Despite this, there is no need for doom and gloom. We expect prospects to improve over the medium term, and believe that the UK has the potential to recover and thrive. But this will depend on creating the right conditions for businesses to grow.”

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