We now inhabit an economy where consumers cannot increase their earnings – public bodies are tied to Government policy and private companies have no fat in their P+L to increase wages and salaries. In turn, corporates are being squeezed by ever rising input costs but the brake on consumer spending by virtue of income constraints means that the ability to raise their prices is severely limited. The obvious and only outcome is that producers who cannot raise prices to cover costs will have to shed labour in the short-term. In the medium-term companies that cannot find greater efficiencies will face only one outcome, closure. Many economists are voicing their concern that the rapid increase in unemployment is inconsistent with the Treasury’s prediction of UK economic performance; It is highly likely that GDP growth has been overstated. If this is the case then the UK will enter a recession by the first quarter of 2009 and monetary policy must be relaxed whatever the current inflation figures say.