Guardian UK: It's (economy) worse than we thought, admits CBI

[marmar]

It's worse than we thought, admits CBI
Letter warns of 'darkening mood' in the economy
James Robinson The Observer, Sunday August 10 2008



Leading employers' organisation the CBI will this week perform a significant U-turn and warn its members that the economy is deteriorating at a faster rate than it had predicted.

As recently as June, Richard Lambert, the CBI's director-general, took a relatively optimistic view, saying we should avoid talking ourselves into recession. But in a letter to mark the first anniversary of the credit crunch, he writes: 'There is no doubt that the mood has darkened in the last two or three months,' and warns that growth prospects for next year and 2010 'look no better than anaemic'. It is the most pessimistic assessment of Britain's economic prospects that Lambert has delivered.

The CBI's change of heart is notable because, although it downgraded its growth forecast for 2009, reducing it from 1 per cent to 0.4 per cent in June, it has been comparatively bullish about the British economy until now. Lambert also warns the government against levying an 'arbitrary and unfair' windfall tax on energy companies, saying this would stop them investing in infrastructure.

He concedes that: 'The CBI, along with most other forecasters, has been consistently over-optimistic about the economic outlook over the past 12 months.' He blamed the volte-face on a surge in inflation that 'took us by surprise' and the prolonged credit crunch, which has been 'bigger and broader than at first appeared likely. A year ago, it seemed reasonable to hope that the worst would by over by now. That has not turned out to be the case.' ........(more)

The complete piece is at: http://www.guardian.co.uk/business/2008/aug/10/economicgrowth.creditcrunch