Economic Recovery to be Slower, says BCC
The British Chambers of Commerce (BCC) has revised its economic forecast for the UK’s recovery, warning that the rate of growth will be slower next year than anticipated.
The BCC had predicted growth of 2.3% in 2011, but in its latest forecast has downgraded that figure to 2.1%, stating that "the obstacles to a sustained medium-term recovery now appear greater."
"The need to significantly cut the UK’s huge budget deficit, strengthen the enfeebled banks and reduce personal debt will inevitably limit growth in the next few years,"
said BCC chief economist, David Kern.
The business group also highlighted the threat of a "double-dip" recession, and questioned HM Treasury‘s public finance forecasts from 2011 onwards, describing them as "too optimistic".
However, the outlook for unemployment is less gloomy than previously feared, according to the BCC. While unemployment is likely to rise in the next six to nine months, the group reduced its prediction for unemployment to peak at 2.65 million in 2010, from its earlier forecast of 2.7 million last December.
"The recession may have technically ended, but there is no room for complacency,"
said BCC director general, David Frost.
"The Government needs to use the forthcoming Budget as a platform for business-led recovery. If it fails to do so, the recovery will take longer to gain momentum and may even slip into reverse."
Frost also urged ministers to abandon the planned 1 per cent rise in National Insurance Contributions next April, which he called a "tax on jobs". Instead, he said a rise in VAT to 18.5% would offset lost revenue.
According to the Tenon Forum‘s director of tax policy, Andrew Hubbard, small firms needed to "sit tight and hold their nerve", as the UK’s economic situation remained unclear.
"The storm is clearly not over, and although we have seen a mood change, the sense that we’re coming out of the worst times is ebbing away. However, if there is a recovery, it could be quick to take hold, so small firms need to be ready to seize any opportunities."
An HM Treasury spokesperson would not comment on the economic forecasts.