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UK growth forecast nudged down by BCC

UK growth forecast nudged down by BCC

Category: Economy

Updated: 01/09/2011
First Published: 01/09/2011

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The British Chambers of Commerce (BCC) has downgraded its prediction for growth in the UK in 2011 and 2012.

Though growth is expected to be weaker over the short-term, the new forecast predicts a gradual improvement, and warns against unjustified gloom about the UK 's economic prospects.

The group now expects UK growth to total 1.1% this year, down from 1.3%.

It predicts that the UK will then grow by 2.1% in 2012, with output improving to 2.5% in 2012.

Over the shorter term, the BCC said that it expects to see growth of 0.3% in the third quarter of the year, followed by a rise of 0.5% from October to December.

"The challenges faced by the UK economy are more difficult than first thought at the beginning of the year," admitted David Frost, director general of the BCC.

"Growth will be slow, inflation will remain high, and the number of those out of work will increase. Despite this, there is no need for doom and gloom. We expect prospects to improve over the medium-term, and believe that the UK has the potential to recover and thrive.

"But this will depend on creating the right conditions for businesses to grow."

David Kern, chief economist at the BCC, said that in addition to maintaining low interest rates, if weak economic growth continues, the BCC expects the Bank of England's rate-setters to consider increasing the Quantitative Easing programme from £200 billion to £250 billion.

In its report, the group also predicted that UK unemployment will reach a peak of 2.62 million in the final three months of 2012.

And it does not expect interest rates to increase from the current level of 0.5% for a year, with the first rise not likely until August 2012.

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