Britain's unemployment rate rose to 7.8% in June, its highest level since 1996. The Bank of England said inflation would fall under 1 percent as the economy begins a tentative recovery from recession.
AFP - The number of people unemployed in Britain has hit a 14-year high, official data showed on Wednesday, as the Bank of England forecast only a slow recovery for the recession-hit British economy.
British unemployment climbed by 220,000 to 2.43 million people in the three months to June -- the highest level since September 1995.
The unemployment rate rose to 7.8 percent in the three months to June, hitting a 13-year peak, according to official data.
Also on Wednesday, the Bank of England said the rate of British 12-month inflation was set to fall under 1.0 percent this year as the economy makes a slow recovery from recession.
The BoE's forecasts imply "little need to tighten monetary policy any time soon," said James Knightley, an economist for ING Bank.
In a bid to reignite the economy, the Bank of England has slashed interest rates to a record low 0.5 percent and pumped out 175 billion pounds (203 billion euros, 288 billion dollars) of new money to encourage banks to lend to businesses.
"On balance, the stimulus should lead to a slow recovery in economic activity, but the timing and strength of that recovery remains highly uncertain," the BoE said in its latest quarterly report on Wednesday.
The recession-mired British economy shrank 0.8 percent in the second quarter compared with the preceding three months. That had marked the fifth quarterly contraction in a row.
British 12-month inflation meanwhile slowed to 1.8 percent in June, dropping under the BoE's 2.0-percent target for the first time in almost two years, recent official data showed.
While the country was set to avoid deflation -- or a prolonged period of falling prices -- unemployment in Britain was expected to rise further.
"The outlook for the labour market still looks pretty horrible, despite mounting signs that the economy could achieve modest growth in the third quarter," Howard Archer, chief Britain economist at the IHS Global Insight consultancy, said on Wednesday.
"Unemployment is a lagging indicator and the sharp economic contraction suffered between the second quarter of 2008 and the second quarter of 2009 will continue to weigh down on the labour market for an extended period."
Britain's ailing banks have been at the forefront of a massive jobs cull over the past year, with thousands of positions being axed at state-rescued Lloyds Banking Group and Royal Bank of Scotland.
In a bid to stave off job losses, some major British companies are asking staff to take pay cuts and even work for free.
About a fifth of British Airways' 40,000-strong workforce, including pilots, have agreed to accept cuts in pay or to work for free to help the group save millions of pounds.
And telecoms group BT is offering employees a year at home in return for a 75-percent pay cut.
"While latest data and survey evidence suggest that the economy will return to growth in the third quarter... significant relapses remain highly likely and we could well be in for a very bumpy period for some considerable time to come," economist Archer added.
Date created : 2009-08-12