The British Chambers of Commerce (BCC) has today published its new Quarterly Economic Forecast, downgrading its prediction for UK GDP growth in 2011 and 2012.
Though growth is expected to be weaker over the short-term, the new forecast predicts a gradual improvement, and warns against unjustified gloom about the UK’s economic prospects.
According to the forecast, GDP growth will be 0.3% in the third quarter of the year and 0.5% for the fourth. It will reach 0.6% in the first quarter of 2012. In 2011, the UK GDP will grow 1.1%, while in 2012 it will grow 2.1%, showing a promising gradual improvement. Consumer spending is expected to decrease by 1%.
Unemployment is now forecast to peak in the fourth quarter of 2012, at 2.62 million.
Additionally, lower growth prospects, both globally and in the UK, means that official interest rates will need to stay at very low levels for longer than previously envisaged. BCC expects rates to rise in August 2012, reaching 1% in Q4 2012 and 2.25% in Q4 2013.
David Frost, director general of the British Chambers of Commerce, commented: “The challenges faced by the UK economy are more difficult than first thought at the beginning of the year. Growth will be slow, inflation will remain high, and the number of those out of work will increase. Despite this, there is no need for doom and gloom. We expect prospects to improve over the medium-term, and believe that the UK has the potential to recover and thrive. But this will depend on creating the right conditions for businesses to grow.”
Frost also called for Government to match deficit-reducing measures with policies that will stimulate growth, indicating net exports and business investment as its main drivers.
“We have to get the economy onto a more sustainable long-term footing, and it is business that will help us achieve that. For the government, that means taking a serious look at the infrastructure that supports our businesses, from the education system to transport links, as well as reducing red tape and reforming the planning system, to allow firms to expand and grow. If we don’t get these policies right, we risk any recovery being weak and short-lived,” he concluded.
David Kern, chief economist at the British Chambers of Commerce, said: “With global prospects worsening, and the UK growing slower than previously envisaged, the economy faces serious challenges. There are painful adjustments ahead, with a decline in living standards, though the recent pessimism from some quarters is unwarranted. UK growth with stay positive, but it won’t be until 2013 that we will see GDP returning to pre-recession levels, and 2014 until consumer spending recovers to its Q1 2008 level.”
