Unemployment to hit 3.4 million, says E&Y

The next year will see the sharpest contraction in the UK economy since the
Second World War, the Ernst & Young Item club has predicted.

UK Gross Domestic Product will shrink by 2.7% in 2009 with a further
contraction of 0.5% predicted for 2010, the think tank predicted before official
figures are released this week.

In its quarterly report on the state of the economy Item also predicted that
unemployment will rise to 3.25m by the end of 2010 and hit 3.4 million in 2011.

‘It is easy to criticise and conclude that none of the Government’s policies
are working,’ said Peter Spencer, chief economic advisor to the Ernst &
Young Item Club.

‘However, we must not lose sight of the fact that they have prevented the
collapse of the monetary system as we know it. But more needs to be done
urgently otherwise the flow of credit will remain frozen and the economy will
remain in recession.’

Item said that inflation and interest rates will both stay close to zero,
helping some homeowners.

But it said that these conditions will do little to aid the housing market,
which it expects to fall 22% more over the next 18 months.

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