The British Chambers of Commerce has raised its growth forecasts but has also confirmed manufacturing output is still 10% behind its pre-recession levels and that its GDP will continue to shrink in 2013.
The British Chambers of Commerce’s (BCC) economic forecast, released today, has raised it expectations for GDP growth in the UK for 2013.
BCC expects UK GDP to grow by 1.3% this year, up from its previous prediction of 0.9%. In 2014 and 2015 respectively it expects 1.9% and 2.2% growth.
BCC has warned however, that the recovery is still fragile and the figures for manufacturing output show that this segment of the economy is still in decline, albeit at a reduced rate.
Manufacturing output declined by 1.7% in 2012 and is expect to shrink by a further 0.8% in 2013. Furthermore Q2 2012 is still 10% below its Q1 2008 pre-recession level according to BCC’s data.
The future looks brighter however.
BCC expects UK manufacturing output to grow by a modest 1.1% in 2014 and by 1.3% in 2015.
Stronger predicted growth in the service sector – 1.9% is expected in 2013, rising to 3% in 2015 – means that total industrial output will decline by 0.9% in 2013 and then pick up by 0.8% and 1.0% in 2014 and 2015 said BCC.
Commenting on today’s revised economic forecast John Longworth, director general of the British Chambers of Commerce, congratulated businesses on their “steadfast determination” to grow and display confidence “in the face of unwarranted pessimism over the economy”.
However, he warned that the recovery is not yet secure. “We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks,” he said.
He observed that external factors, such as the eurozone, the Middle East, and the Chinese economy could easily halt the UK’s progress. He also said that while BCC’s surveys have shown that firms are confident about their prospects and want to expand, they need assistance in the form of better access to finance.
Mr Longworth called for the government and the MPC to do more to ensure that vibrant SMEs can obtain finance on reasonable terms. “The government must also work with the Bank of England and the Treasury to underwrite private sector investment in infrastructure projects, and our ‘have a go’ exporters need support on the ground to help them break into new markets,” he continued.
Focussing on exports David Kern, BCC chief economist, added that, while the rebalancing of Britain’s economy towards exports is not yet sufficient, “we have made more progress than people realise. The real trade deficit in goods and services has more than halved in the last three years, and the surplus in services has and will continue to play a key role in narrowing our trade gap.”
He continued, “While we would like to see more growth coming from investment and net trade, we should not be too concerned that consumer spending is helping to drive the recovery – it is better to rely initially on the consumer than to have no growth at all.”
Other breakdowns of BCC’s data showed that Q2 2013 recorded a small, 0.9% increase in business investment.
While weak investment in Q4 2012 and Q1 2013 mean that the full year data is still likely to show declining investment, BCC is positive about the outlook for the coming two years. It expects business investment will increase by 4.2% in 2014 and 4.8% in 2015.