BCC downgrades UK economic growth
The British Chambers of Commerce (BCC) has today said the fresh round of quantitative easing (QE) announced by the Bank of England last week may not be enough to prevent the economy from slipping back into recession and “more radical measures” are required.
BCC Chief Economist David Kern said in an e-mailed statement in London today: “Given the worsening international situation and the acute problems facing the euro zone, there is a clear need for the Monetary Policy Committee and the government to make every effort to avert risks of recession.
“The recent increase” in so-called quantitative easing “is welcomed, but more radical measures are needed.”
Its comments came as it downgraded its forecast for the UK, expecting the economy to grow by just 1.1% in 2011, compared with a forecast of 1.9% earlier in the year.
Last week, the Bank of England announced it will restart its QE scheme – a move which was widely expected after the Office for National Statistics (ONS) recently revealed the UK economy grew by 0.1% in the second quarter – slightly less than a previous estimate of 0.2%.
A recent slew of weak economic data had led to speculation that the central bank would embark on its “QE2” programme to boost the economy.
The Bank said it will pump a further £75 billion via its QE scheme after injecting £200 billion into the economy in November 2009.
QE, also known as printing money, is a process used for buying Government bonds or other financial assets.
Returning to the BCC, it believes the pace of the UK recovery “will remain slow” and a recession can be avoided but this means the Government must make “some tough policy choices”.
A survey by the BCC published today showed domestic and export sales at manufacturers and services companies fell in the three months to September.
An index of domestic factory sales slumped by 15 points to 3 – representing the lowest figure since quarter one last year, while the domestic sales component at services companies fell by 10 points to zero. Furthermore, the employment outlook and confidence index fell.
The survey was conducted between 29 August and 21 September and covered 6,702 companies. The BCC described the results as “disappointing and worrying”.
There has been a raft of disappointing economic news today after the ONS revealed UK factory output fell 0.3% in August on a monthly basis.
The reading was worse than economists had expected and confirm weak prospects for the economy after the figures suggest a poor start to the third quarter.
Furthermore, the British Retail Consortium (BRC) said retail sales saw a slight improvement in September but overall prospects remain weak.
Finally, the Royal Institution of Chartered Surveyors (Rics) today reported that the UK housing market is suffering due to fears over the economy.
The Rics report said 23% of surveyors reported house prices fell rather than rose – unchanged from August’s figure.