BCC warns of new double-dip risk

| May 30, 2010 | 0 Comments

The British Chambers of Commerce (BCC) has warned there is a risk of a double-dip recession (whereby the economy goes into recession twice without having undergone a full recovery in between).

The warning from the business group comes as it said the Government should delay making big spending cuts as the recovery is still weak.

Last week, Chancellor George Osborne unveiled details of the new coalition Government’s plans to shave £6.2 billion off public spending this financial year.

However, Mr Osborne’s predecessor, Alistair Darling, warned that cutting the deficit too quickly could pose a threat to the fragile recovery.

Furthermore, prior to the general election, the Liberal Democrats said such measures could threaten the recovery but have now endorsed the cuts.

BCC chief economist, David Kern, comments: “Significant additional fiscal tightening - beyond the £6 billion already announced - should only be implemented when the recovery is definitively more secure.

“The recovery is still weak, and it would be unwise to disregard the threat of a double-dip recession,” he added.

Britain’s economy is emerging from its deepest downturn since the aftermath of the Second World War and experts say it could be a number of years before economic output returns to pre-recession levels.

The BCC has cut its growth outlook for next year as a result of the spending cuts. Its latest economic outlook raises the 2010 growth forecast to 1.3% from 1% but has trimmed next year’s forecast to 2% from 2.1%.

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