Economic Slowdown Doesn’t Mean Another Recession, says BCC
Sluggish consumer spending and high inflation mean economic growth will be slower than expected over the next two years, but another recession is unlikely, the British Chambers of Commerce (BCC) has said.
The BCC’s latest quarterly economic forecast predicted UK economic growth would be 1.3 per cent this year and 2.2% in 2012, down from its forecast in March of 1.4% and 2.3%.
Despite its pessimistic outlook, the BCC said it supported the Government’s tough fiscal approach to tackling the UK’s deficit and that a further recession was “unlikely”.
“The Government has more to do if the private sector is to create new jobs, invest and export, and contribute to a lasting economic recovery in the UK.”
said BCC director general, David Frost.
“New regulatory burdens, business taxes and measures that damage initiative, enterprise, and innovation must be avoided or scrapped.”
BCC chief economist, David Kern, said that he was expecting the Bank of England to increase interest rates in August 2011;
“Although we would prefer to see interest rates held until the fourth quarter, we believe British businesses will be able to absorb small increases.”
Kern added that interest rates were likely to reach 2.75% by the end of 2012.
In its latest report, the Confederation of British Industry (CBI) also predicted a long period of slow growth, but said that the UK would avoid a double-dip recession.
“What remains striking is how little we expect the pace of growth to accelerate in 2012, and that it will be far less robust than we’d normally expect in the second and third years of a recovery.”
said CBI’s chief economic adviser, Ian McCafferty.