We’re living through turbulent times at the moment: with Wall Steet in shock as Lehman Brothers announces bankruptcy, and the Fed and major global banks are in moves to shore up the global markets shaken by the housing and mortgage crisis. There’s also news this morning that the Bank of America is in advanced talks to acquire Merrill Lynch for up to $38 billion (£21.2 billion) after walking away from talks over a rescue of Lehman Brothers.
Judy Viitanen has read a new warning this morning of the looming UK recession – with the CBI saying the economy is set to shrink over the next six months. The business lobby group predicts the economy will contract by 0.2% between July and September. That will be followed by a further 0.1% decline in the fourth quarter. The organisation also slashed next year’s UK growth forecast by 1%. It said the economy would grow by a “feeble” 0.3% during the whole of 2009. That is the lowest rate since 1992. The CBI also warned that unemployment would top the two million mark next year, up from 1.67 million out of work between April and June.
To compound this extreme instability in the global financial markets, there’s evidence that all these recession forecasts and fears are battering business confidence. The latest Lloyds TSB Business Barometer shows that business confidence in the future of the economy is willowing towards an all-time low. It appears that 53 per cent of firms are pessimistic about the future of the economy, while 20 per cent are optimistic. Across the sectors, distribution firms report the weakest confidence levels, while firms in the service sector have slightly better hopes.