Global slowdown, austerity to constrain UK economy - BCC
By Jonathan Cable | December 4, 2012 11:28 AM EST
Britain's economic growth in the next two years will be weaker than previously thought, held back by a global slowdown and domestic austerity measures, the British Chambers of Commerce (BCC) said on Tuesday.
The BCC revised down its gross domestic product (GDP) growth forecasts for 2013 and 2014 to 1.0 and 1.8 percent respectively from 1.2 and 2.2 percent, also citing weak household consumption.
Economists polled by Reuters last month predicted similar rates of growth and the BCC report will provide gloomy reading for chancellor George Osborne the day before he presents a half-yearly budget statement to parliament.
"We expect quarterly growth to increase gradually over the next two years, but we have to accept that it will remain modest and below trend for some time," said BCC Chief Economist David Kern.
"Although there will be a slow improvement over the medium term, GDP will only return to its pre-recession levels at the end of 2014."
After two recessions in four years, Britain bounced back to growth in the last quarter, helped by extra working days and London's hosting of the Olympic Games. But analysts reckon the economy will expand by a far lower 0.1 percent in the current quarter and will barely pick up in the year ahead.
The recovery has been hampered by a protracted debt crisis in the euro zone, Britain's main trading partner, as well as by the government's debt-cutting plans.
Osborne said on Sunday that it was taking longer than hoped to deal with Britain's debts, but insisted he would stick with the programme when he delivers what is known as the Autumn Statement on Wednesday.
However, the BCC said the government also needed to support growth, job creation, exports, investment, and business confidence.
"The fact remains that growth is still too weak. We are calling for decisive action in the Autumn Statement. Business wants a hybrid strategy that delivers both deficit reduction and (economic) growth," said John Longworth, BCC Director General.
Public sector net borrowing in the 2012-13 year will be 104.1 billion pounds, the BCC said, around 12 billion higher than the Office for Budget Responsibility, an independent fiscal forecasting body, predicted in March.
The trade group, representing firms employing more than one in five private-sector workers in Britain, said unemployment was likely to peak at around 8.1 percent in the final months of next year partly due to job losses in the public sector.
It also revised up its inflation forecasts for this year and next.
(Editing by Ruth Pitchford)
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