Flu seen prolonging, deepening recession

By Catherine Bosley

LONDON (Reuters) - The H1N1 flu pandemic is likely to push Britain into a longer and deeper recession because of its potential impact on consumer spending and travel, a consultancy and a business association estimated on Friday.

The total cost of the flu outbreak for Britain was likely to be around 5 percent of GDP, on top of the impact of the worst financial crisis to hit the country in decades, a report from consultants at Oxford Economics said.

This view was broadly shared by the Federation of Small Businesses, which said the pandemic could force 120,000 small businesses to suspend operations.

"We're expecting the cost to the whole economy of 3 percent of GDP," said the organisation's spokesman Stephen Alambritis, who predicted disruption from cancelled meetings, suspended travel and parents staying home to care for sick children.

"The cost of absence at work is the main cost that has to be met by businesses, and that's up to about 900,000 pounds a day," he said. "We're expecting the impact to start in September, but the worst will be the last quarter of this year."

Britain has Europe's highest death toll to date from disease, with 29 fatalities since the virus emerged in Mexico in April, and the World Health Organisation said 431 people had died globally as of early July.

British health officials are initially planning for up to 30 percent of the population to fall ill, with up to 12 percent of the workforce absent at once.

Both Alambritis and Oxford Economics said the pandemic's most severe impact would occur in the last three months of 2009.