THE Government will have to borrow almost £100bn more than previously forecast as it tries to bring a deeper-than-expected UK recession under control, business leaders warned today.
In its latest dire warning on the economy, the CBI business group said the economy will shrink by 3.3% in 2009, compared with its November forecast of a 1.7% contraction.
It also predicted State borrowing would be much higher than Chancellor Alistair Darling forecast in his Pre-Budget Report last year.
The CBI said borrowing is expected to reach £149bn in the 2009-10 financial year – or 10% of gross domestic product (GDP).
Ian McCafferty, CBI chief economic adviser, said: “You would have to go back a long way before you found a deficit as high as 10% of GDP. In recent years we have seen deficits of around the 3% mark as being strongly sustainable.”
The CBI said it does not expect the Bank of England to cut interest rates much further than the already historic low of 1%.
Mr McCafferty said: “The most urgent requirement is to get the various credit support schemes, announced recently, under way.
“Faced with continued uncertainty about access to credit, firms will continue to take drastic action to protect their businesses.”