UK recession to be 'worse than expected'
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Business leaders are warning the recession will be deeper and longer than expected with many more jobs lost.
The CBI said the Government will also have to borrow around a £100 billion on top of their expectations.
Spokeswoman Lai Co said ministers had spent heavily to bail out the banks and cut VAT but there was now less money coming in.
In its latest dire warning on the economy, the CBI said the economy will shrink by 3.3 per in 2009, compared with its November forecast of a 1.7 per cent contraction.
Ian McCafferty, CBI chief economic adviser, said many countries had been forced to revise their projections down in recent months as the severity of the recession became apparent.
'I think circumstances have changed. The Pre Budget Report was done in October, November and we have seen a dramatic and global change in conditions, literally in the last six to eight weeks,' he said.
'Given the rapid contraction in global economic activity and the continuing credit squeeze, we believe the UK will be mired in a deep recession for the whole of 2009, lasting six quarters in total and accompanied by a significant rise in unemployment.'
The CBI revised its joblessness forecast upwards to a peak of just over three million in 2010.
Average earnings growth is expected to drop in the first three quarters of this year to a low of 1.1 per cent, as people become increasingly prepared to accept pay freezes and cuts. Wages are only predicted to return to the current level of growth - 2.5 per cent - in the last quarter of 2010.
Businesses, which have been battered by the credit crunch and an increasingly savage recession, have already made painful cutbacks on staff and costs.
The CBI said it anticipates firms will scale back investment throughout the forecast period, with a 9.2 per cent drop in 2009 and a 1.7 per cent fall in 2010.
Consumers worried about losing their jobs are forecast to slash spending as they try and build up their savings. As a result household spending is predicted to fall 2.7 per cent in 2009, remaining in negative territory in 2010 with a 1.2 contraction.
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