BCC cuts UK growth forecast
The British Chambers of Commerce (BCC) expects the UK economy to grow more slowly than previously forecast and says it faces “serious challenges”.
In its quarterly economic forecast the BCC forecast growth of 0.6 per cent in 2012, a slight decrease from its previous forecast of 0.8 per cent.
It expects the government’s efforts to reduce debt levels, which are still too high, to depress demand and lead to a longer than expected period of low growth.
However the BCC does expect the UK to escape falling into a double-dip recession.
The group expects unemployment to rise from 2.6 million currently to 2.9 million at the start of next year.
Nearly a quarter (23 per cent) of young people between the ages of 18 and 24 are expected to be unemployed.
The BCC has called on the government to produce a budget that will encourage firms to export, invest and grow and it wants a planned 5.6 per cent increase in business rates to be scrapped.
The BCC’s director general John Longworth said: “The UK economy faces serious challenges, with problems in the eurozone creating difficulties for exporters, combined with dampened domestic demand”.
Interest rates are expected to remain at 0.5 per cent until late next year, after which they will increase slightly.
Economic growth is expected to increase to 1.8 per cent in 2013.
There was better news from the Markit/CIPS construction index, with the February reading increasing to 54.3, from 51.4 in January.
With figures over 50 representing growth, February’s result is another indicator that the economy may escape a double-dip recession.
Demand increased for house-building, commercial construction and civil engineering during the month.
Markit economist Sarah Bingham said: ‘The improved performance of the construction sector adds to other positive data released on the UK economy’