By Daniel Hunter
The British Chambers of Commerce (BCC) on Friday published its new Quarterly Economic Forecast, downgrading its prediction for UK GDP growth in 2012 to 0.1% (from 0.6%).
Although there will be minimal growth this year, economic prospects will gradually improve, with growth of 1.9% in 2013 (revised upwards from 1.8%).
“Our new forecast underlines the need for bold action to deliver growth," John Longworth, Director General of the British Chambers of Commerce, said.
"Businesses are busting a gut in an uncertain environment, and they will need to continue to do so. But if companies are to accept uncertainty as the new norm, then they must be met with a bold, enterprise-friendly government to enable them to grow in the long term.
"Without government working together with business, the economy will continue to bump along the bottom for longer than we’d all like."
After declining by 0.3% in Q4 2011, GDP recorded a further 0.3% fall in Q1 2012; this pushed the UK economy into technical recession. We (BCC) question the ONS’ assessment, as most business surveys indicated positive Q1 growth and employment increased in the quarter.
Ongoing problems in Europe will persist for some considerable time and cause difficulties for UK businesses. Net exports and business investment will be important drivers of UK economic growth in the next two to three years. But there will also be a modest improvement in consumer spending.
Deficit reduction is crucial to maintain the UK’s market credibility, but growth must also be top of the government’s agenda.
Given the fall in GDP in Q1 2012, and the continued difficulties in the eurozone, we believe that GDP growth for 2012 will be minimal at 0.1% (revised down from 0.6%). This will be followed by stronger growth of 1.9% in 2013 (revised up from 1.8%) and 2.3% in 2014.
Growth in Q2 2012 is likely to be zero, or even slightly negative, due to the additional bank holiday for the Diamond Jubilee. But UK GDP growth is set to improve from Q3 2012.
Household consumption will see a modest improvement from -1.2% in 2011, to positive growth of 0.7% in 2012, 1.7% in 2013, and 2.1% in 2014.
We expect a strong recovery in business investment from 1.2% in 2011, to 4.3% in 2012, 7.3% in 2013, and 7.6% in 2014. UK exports will grow more rapidly than imports in both 2013 and 2014.
“We want to see measures like the creation of a business bank, which would provide capital to new and growing companies; real domestic deregulation, and a moratorium on new European regulation that hinders businesses; and clear, long term strategies on aviation and energy to deliver more certainty to supply chains and investors," John Longworth added.
"All of these measures that can be achieved while sticking to the aims of deficit reduction and crucially, maintaining the UK’s market credibility.
“There are also measures that will help insulate the UK from some of the risks in the eurozone. Investment in infrastructure to create robust rail, air, maritime, energy and digital networks could be privately funded or kick-started by the public sector, with pension funds and sovereign wealth funds able to purchase the assets when the projects are completed.
“We need growth, and we need it now. If the government works together with the private sector to create the right environment over the long term, we’ll be able to prove once and for all that bold businesses can propel us forward, out of stagnation and firmly on the road to recovery.”
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