AND THE REST !

This shows the interdependence of today’s global economy.  It also   
poses the question of what is going to power the British economy in 
the future.

Brown left us vulnerable and without reserves when the crisis hit.   
Hitherto the powerhouse has been The City and its financial 
expertise.  That’s a question not yet being asked in many places.

xxxxxxxxxxxxx cs
===================
THE TIMES   15.9.08
CBI forecasts unemployment of two million by end of 2009
Unemployment in Britain will surge by 450,000 to 2.12 million by the 
end of next year
    Gráinne Gilmore Economic Correspondent

Unemployment in Britain will surge by 450,000 to 2.12 million by the 
end of next year, a level not seen since 1997, when Labour came to 
power, as the country endures its first recession since the early 
1990s, the CBI forecasts today.

In a dramatically revised outlook for the economy, the employers' 
organisation says that Britain is already in a recession and will not 
recover until the middle of next year. It adds that homeowners will 
continue to suffer brutal falls in the value of their property.

The CBI says that the dismal economic conditions will lead to 
hundreds of thousands of job cuts by the end of 2009, forcing the 
number out of work above two million and taking the rate of 
unemployment up from 5.4 per cent to 6.8 per cent.

Richard Lambert, Director-General of the CBI, said: “We are now 
almost certainly in a mild recessionary phase.”

Earlier this year the CBI said that Britain would avoid recession, 
but it has drastically cut its forecasts after continued surges in 
energy prices and an economic slowdown that has been far sharper than 
expected.

The Organisation for Economic Co-operation and Development and the 
European Commission have slashed their forecasts for the UK to show a 
recession in the second half of the year. The British Chambers of 
Commerce has said that the recession could lead to more than two 
million people unemployed by Christmas.

The CBI also forecasts that the Government will break one of its 
fiscal rules. It says that government borrowing is set to rise, 
pushing public net debt to more than 40 per cent of GDP.

The Government has often pledged that it would not breach this 
threshold over the economic cycle, but there is speculation that 
Alistair Darling is preparing to change this rule in his Pre-Budget 
Report next month to give the Treasury room over spending.

This comes days after Mervyn King gave warning that breaking the 
fiscal rules could lead to higher inflation. The Governor of the Bank 
of England said: “The long-term risk is [that] a fiscal framework 
that is not perceived by financial markets to be credible does put up 
pressure on inflation expectations, because it undermines the 
market's belief in the credibility of both the monetary and the 
fiscal framework.”  [ie “Confidence” is the critical factor gone 
missing! -cs]

The economy ground to a halt between April and the end of June, 
recording no growth at all, official figures show. The CBI believes 
that that it is set to shrink by 0.2 per cent between July and and 
the end of this month and contract by a further 0.1 per cent in the 
final three months of the year. A recession is defined as two 
consecutive quarters of shrinking output. The CBI expects the economy 
to stall for a further three months at the beginning of next year, 
before growing marginally by 0.1 per cent between April and June.

Mr Lambert said that while he did not believe that conditions would 
be as bleak as in the early 1980s and early 1990s, consumers and 
businesses were in for a tough time.

There was more bad news for homeowners as the CBI said that the value 
of an average house would tumble by about £33,000 from January's peak 
of £221,130, based on house price figures from the Department of 
Communities and Local Government.    Ian McCafferty, chief economic 
adviser to the CBI, said: “The existence of the credit crunch has 
made the adjustment in the housing market more brutal than it would 
otherwise have been.” He said that the mortgage market would remain 
clogged up until next summer, as mortgage funding remained scarce