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LONDON (AP) — The outlook for the British economy has worsened because of slowing global demand, sagging confidence and turmoil in the eurozone, the Bank of England said Wednesday as new data showed unemployment rising to the highest rate in 15 years.Unemployment rose to 8.3 per cent in the three months through September, the highest since January 1996, as companies prepare for grim times ahead. The Bank of England halved its forecast for economic growth in 2012 from 2 per cent to 1 per cent, and pared its projection for 2013 by half a point to 2.5 per cent.
“Implementation of a credible and effective policy response in the euro area would help to reduce uncertainty and so support U.K. growth, but its absence poses the single biggest risk to the domestic recovery,” the bank said in its quarterly Inflation Report.
The government likewise blamed the eurozone for rising unemployment.
“These figures show just how much our economy is being affected by the crisis in the eurozone,” said Employment Minister Chris Grayling. “Our European partners must take urgent action to stabilise the position.”
The eurozone is battling to contain market jitters over too much debt in some countries. Confidence is eroding in ever-larger countries, such as Italy and even France.
Britain is also tightening its government spending to reduce its debt load. That is expected to slow growth further and squeeze households’ finances.
The Bank of England expects inflation to fall rapidly from its current annual rate of 5 per cent, which is far above target, as growth remains weak.
The downbeat report raised expectations that it will soon commit more money to its economic stimulus program, after authorizing an additional 75 billion pounds ($119 billion) of asset purchases in October. The program hopes to boost lending activity — and therefore economic growth — by increasing the amount of cash available in the financial system.
How much such a program can help create jobs is uncertain, however. The latest jobs figures from the Office for National Statistics showed the number of unemployed people increased by 129,000 in the July-September quarter compared with the previous three months. That was the largest quarterly increase in two years.
Unemployment has risen as Britain’s economy has grown slowly over the last year. The number of people out of work for more than two years rose to 422,000, an increase of 13,000 from the previous three months.
“There’s little to suggest that the economy will be strong enough to stop unemployment rising further,” said Samuel Tombs, U.K. economist at Capital Economics.
Job vacancies have been on a flat to downward trend in recent months, while activity surveys point to further falls in private sector employment ahead, Tombs said.
The unemployment rate for people aged 16 to 24 now stands at a record 21.9 per cent, prompting the head of the Confederation of British Industry to call for urgent action by the government.
“A generation risks being scarred by the devastating effects of long-term unemployment,” said John Cridland, the CBI’s director general. “We are calling for action for jobs now, with a clear plan to get the UK working, focusing on our young people.”
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