British business leaders seek urgent help

Britain's business leaders gather in London Monday seeking urgent government help as the country teeters on the brink of its first recession in over 15 years, as a result of the global credit crunch. The annual Confederation of British Industry (CBI) conference seems likely to be dominated by the government's announcement on the same day of an economic stimulus plan to combat the downturn. CBI Director-General Richard Lambert has said that any efforts made by the government had to have an immediate impact because businesses across the country were facing "real problems", particularly with cash flow. While welcoming a recent 37-billion-pound (64 bln dollar, 47 bln euro) bank bailout, he warned last week that British companies were operating in "critical times" due to sharp declines in both business and consumer confidence. "Banks were on the edge, looking over a precipice and have been pulled back. "But there is a worry over the short term availability of funds for small businesses. That is a real problem," he said. Britain has been hit hard by the global economic downturn, with the economy contracting by 0.5 percent in the three months to September, the first decline in economic growth here since 1992. The Bank of England, Britain's central bank, has also warned of the risk of deflation -- a prolonged period of falling prices -- unless interest rates were cut further from their current level, already the lowest since 1955. Unemployment, meanwhile, has surged, jumping to an 11-year high of 5.8 percent in the three months to September. It is expected to worsen in the coming months -- major companies such as AstraZeneca, BAE Systems, Rolls-Royce, BT Group and Virgin Media have axed thousands of British jobs in recent weeks. That is in addition to souring consumer sentiment and worsening government finances. The CBI itself has warned that Britain faces a longer and deeper recession that it previously thought, with unemployment peaking at around 2.9 million in the middle of 2010. In September, the CBI downgraded its 2008 growth forecast from 1.7 percent to 1.1 percent. Earlier this month, it lowered those projections further, to 0.8 percent. It also predicts the economy will contract by 1.7 percent in 2009 against a forecast in September of 0.3 percent growth. In a speech to the CBI conference, Prime Minister Gordon Brown is expected to press banks to make good on promises to resume lending to small businesses, as agreed under last month's bailout. "I call on the banks to fulfill their commitment on the availability and cost of lending," he said, according to quotes released in advance by his office. Finance minister Alistair Darling is expected to boost public spending, help small businesses more and implement targeted tax cuts -- although business minister Peter Mandelson has signalled taxes will have to go up again later. "If you take action now to expand borrowing, you know you will have to make structural adjustment later on, but that is later on when we are through this recession, as we will get through," he said. Meanwhile David Cameron, leader of the main opposition Conservative Party, has harshly criticised the Labour Party government over its profligacy in years of economic growth, and recently pledged to curb growth in public spending, slamming government projections as "unsustainably high". The CBI is Britain's biggest employers' body, representing around 240,000 companies who account for around one-third of Britain's private sector workforce. Chief executives attending this year's conference, which will also focus on revitalising Britain's manufacturing sector, include George Buckley, who heads technology firm 3M, and Jeroen van der Veer, boss of energy giant Shell.