British Businesses Are Facing Two Very Difficult Years
By Claire West
The British Chambers of Commerce has today (Monday) published its quarterly economic forecast, which highlights a significant worsening in UK economic prospects.
• There is now a distinct possibility of technical recession.
• UK unemployment is likely to increase by some 250,000-300,000 over the next two to three years.
• The longer the MPC waits before cutting rates, the bigger the danger that the situation will deteriorate, and the policy choices will become more difficult and unpleasant.
• The “golden rule”, which prescribes that the Government will only borrow for investment over the economic cycle, is very likely to be breached.
• Government temptation to raise business taxes because it is running out of money, must be forcefully resisted.
British Chambers of Commerce Director General David Frost commented:
"Whilst a marked slowdown in activity is likely over the next 18 months, even if interest rates are cut when inflation peaks, the correct policy decisions are still needed to ward off the threats of a serious and prolonged recession.
"The longer the MPC waits before cutting rates, the bigger the danger that the economic situation would deteriorate."
Launching the August 2008 BCC Economic Forecast, David Kern, Economic Adviser to the BCC, said:
[i]"Our quarterly economic forecast highlights a significant worsening in UK economic prospects. There is now a distinct possibility of technical recession.
"The level of UK unemployment is likely to increase to nearly 300,000 over the next few years, reaching almost two million. An increase above two million cannot be ruled out.
"Over the next two or three quarters, we expect UK GDP growth to be slightly negative or zero. Thereafter, we expect a shallow recovery, but the period of weak, below-trend, growth is likely to be prolonged, lasting until the... continued on page two >