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BCC revises growth forecast

BCC revises growth forecast

Category: Economy

Updated: 06/12/2010
First Published: 06/12/2010

MONEYFACTS ARCHIVE
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The UK economy will not grow as quickly as was expected next year, but will expand at a greater pace in 2012, according to the British Chambers of Commerce (BCC).

Ahead of the Bank of England's Monetary Policy Committee meeting on Thursday, the BCC has said that it expects the UK economy to grow by 1.9% in 2011.

This is down from the previous figure of 2.2%, but the organisation has raised its prediction for 2012 growth from 1.8% to 2.1%.

The downward revision to the 2011 growth forecast is a reflection that the BCC believes the Government's austerity measures will have a more negative impact than was originally thought.

This is mainly due to lower house prices and other signs of financial fragility in the UK household sector.

In addition, it is predicted that the worsening Eurozone debt crisis will also dampen UK growth prospects next year more than formerly expected.

The economy's longer-term prospects are now more positive than a few months ago, because there is more evidence that rebalancing towards the private sector is taking place.

Separate figures out today show that the manufacturing sector in the UK is in
rude health, thanks in large part to strong demand from overseas customers.

"UK GDP growth was very strong in the second and third quarters of 2010, and the pace of expansion should remain satisfactory with growth of 0.6% in Q4 2010," said David Kern, chief economist of the BCC.

"This will be sustained by the competitive sterling exchange rate, the continued effects of the earlier policy stimulus, and consumers attempting to beat the VAT increase.

"However, some of the factors driving growth in 2010 are temporary. The fiscal austerity programme entails risks, particularly in the next few quarters.

"We expect a sharp slowdown in the pace of UK growth starting in Q1 2011, in reaction to the VAT rise to 20% and as tough deficit-cutting measures are implemented."

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