Workers should be braced for more job losses and pay freezes next year in a “fragile” recovery from recession, the CBI is warning today.
The business organisation’s latest forecasts predict unemployment will peak at 2.8 million next autumn - lower than first feared - with “very constrained” wage growth.
John Cridland, CBI deputy director-general, said the outlook was “brightening” but warned: “We will need to keep our nerve during early 2010, and there is no sign of a clear driver of strong economic growth.
“In the spring many staff will face another cycle of wage freezes, and job losses will continue rising until the autumn.”
The CBI expects the UK to finally pull out of recession during the final quarter of this year with 0.5 per cent growth, but said the economy will advance at a far more sluggish rate during the first half of 2010.
Consumer spending looks slightly stronger than first thought and exporters should gain from a weaker pound, but the CBI also predicts interest rates will rise from their current record low to 2 per cent by the end of 2010.
Chief economic adviser Ian McCafferty said: “The UK economy faces a number of structural hurdles over the coming two years, and this recovery - like that of the 1980s - will be relatively drawn out.
“Credit conditions will remain difficult as the banks slowly nurse themselves back to health, consumer spending will be shaped by the need to rebuild savings, and the public sector will soon have to tighten its belt. All three factors will act as headwinds to growth.”
The organisation predicts net borrowing of £180.8 billion in the current financial year, rising to £184.1 billion in 2010-11 - in contrast with official forecasts of a slight fall from this year’s peak of £178 billion.