Recession just months away, warn employers

Small and medium-sized employers in the manufacturing and services industries said sales and orders from UK customers have started to dry up in the past three months.

The British Chambers of Commerce, which carried out the survey of almost 5,000 of its members, said that if the trend continues the start of a recession could be just three months away.

Its economic adviser, David Kern, said the survey showed a "menacing deterioration" in Britain's prospects.

"We are now facing serious risks of recession," he said. "The outlook is grim and we believe that the correction period is likely to be longer and nastier than expected."

The slowdown has been particularly severe in the service sector, by far the biggest part of the economy, with the number of firms reporting lower orders exceeding those with more orders for the first time since 1990.

The survey also shows manufacturers caught in a squeeze of higher costs and weaker order books.

The BCC's director general David Frost said: "I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country.

"To put more pressure on business would not only restrict business growth and hit the consumer hard, it would crush further what our economy is based on - confidence."

Economists define a recession as two consecutive quarters of negative economic growth. The Treasury is forecasting-growth of between 1.75 per cent and

2.25 per cent this year followed by even stronger growth in 2009, but these projections are now almost universally dismissed as woefully optimistic.

Most City economists still think Britain will just scrape through the downturn without a recession but fear that the risks are growing.

A slew of bad news from major businesses such as Marks & Spencer and housebuilder Taylor Wimpey in recent days has added to the sense that at least a mild recession is inevitable.

There was a further grim announcement today as another housebuilder, Persimmon, announced 1,100 job losses.

The firm reported a 24 per cent drop in revenues from the beginning of 2008 to April, and has seen its share price plunge to a fifth of its value a year ago.

Shadow chief secretary to the Treasury Philip Hammond said: "This survey-will only add to British businesses' concerns about the economy. Instead of being supported in these difficult times, they are facing more tax hikes because Gordon Brown failed to fix the roof while the sun was shining."

The Bank of England's Monetary Policy Committee meets this week to decide whether or not to move base rates currently standing at five per cent. With official inflation hitting

3.3 per cent and expected to soar above four per cent, the Bank is expected to leave rates where they are for now.

Today, Merrill Lynch, one of the City's leading banks, warned it could take the housing market 20 years to recover.

Analyst Mark Hake made the gloomy prediction and added: "House prices are expected to be below their August 2007 peak in a further 10 years' time."