Fears of a ‘W-shaped’ recession
The British Chambers of Commerce (BCC), the leading business group, has voiced its concern about a recovery in the UK.
While the group believes that the worst of the UK’s recession is over, it said talk of a recovery is “premature”.
Last week, official figures revealed that the UK economy shrank by 2.4% in the first three months of 2009 – far worse than expected and the biggest quarterly decline in 51 years.
According to the BCC, the figures indicate that it is far too early to say that a recovery is underway.
The BCC’s report, based on a survey of more than 5,000 companies, established an increase in confidence levels between the second quarter but warned that the increase in confidence was “fragile“.
Rising unemployment continues to be a problem highlights the BCC, with the latest figures showing that unemployment in the UK is currently at 2.26 million. During the three month period to April, there were around 444,000 workers made redundant.
The BCC is forecasting that unemployment will hit 3.2 million by the middle of next year.
Another business group, the CBI, has warned that unemployment will continue to rise and could reach 3 million by the second quarter of next year unless action is taken to help businesses and stem job losses.
Meanwhile, returning to the BCC, the organisation believes there is a risk that the economy could “drop off suddenly” and the UK could be heading towards a “W-shaped” recession.
David Frost, director general of the BCC, comments: “Talk of recovery is premature. Further corrective measures are needed to support the economy. The marked improvement in confidence, albeit from exceptionally low levels, is welcome.”
“Confidence levels are still historically weak and recent improvements can only be sustained if the economy continues to stabilise and the recession ends,” added Mr Frost.
Mr Frost is also pressing for banks to resume to normal lending levels and he also expressed his concern for the increasing levels of public debt.