The British Chamber of Commerce has issues is strongest warnings to date, predicting “a distinct possibility of technical recession.”
It also warned that UK unemployment figures are set to increase by 250,000 to 300,000 over the next two to three years, reaching almost two million.
Additionally, UK gross domestic production is expected to drop over the next two or three quarters, with growth expected to be at zero or slightly negative and no recovery expected until 2010.
In its quarterly economic forecast report, the BCC warns against government temptation to raise revenue by further taxing UK businesses and calls for strong government policy to bolster the ailing UK economy.
“Whilst a marked slowdown in activity is likely over the next 18 months, even if interest rates are cut when inflation peaks, the correct policy decisions are still needed to ward off the threats of a serious and prolonged recession,” said David Frost, director-general of the BCC. “The longer the MPC waits before cutting rates, the bigger the danger that the economic situation would deteriorate.”