By Claire West
The British Chambers of Commerce (BCC) has today (Friday) upgraded its UK growth forecasts for the next three years from 0.9% to 1.3% in 2013, from 1.9% to 2.2% in 2014, and from 2.4% to 2.5% in 2015.
In its Q3 economic forecast, the business group warns that while the upgraded figures are encouraging, the recovery is still not secure and many challenges remain. The BCC has urged the government and the MPC not to become complacent, and do everything in their power to ensure that our economic recovery moves from good to great.
Commenting, John Longworth, Director General of the British Chambers of Commerce, said:
“The improved outlook is testament to the steadfast determination shown by businesses in previous quarters, who have consistently displayed confidence in the face of unwarranted pessimism over the economy.
“Unfortunately however the recovery is not yet secure. We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks. There are many external factors, such as the eurozone, the Middle East, and the Chinese economy that could halt our progress. However our surveys have shown that firms are confident about their prospects and want to expand, but they cannot do it alone.
“Improving access to finance for viable, fast-growing businesses is a major priority, and the government and the MPC must do more to ensure that vibrant SMEs can obtain finance on reasonable terms. The government must also work with the Bank of England and the Treasury to underwrite private sector investment in infrastructure projects, and our ‘have a go’ exporters need support on the ground to help them break into new markets.
“The government simply cannot divert attention away from growth, and must adopt measures to foster an enterprise-friendly environment in which businesses can continue to create jobs, invest and export. Only by doing this will we encourage the optimism and move our economy forward from good to great.”
David Kern, BCC Chief Economist, added:
“The new forecast signals an improvement in our economic prospects, but reducing the structural fiscal deficit continues to be a long and painful process. Tax receipts are inadequate as a result of sharp falls in oil and gas reserves, and cuts in current spending will be needed until 2019 at the earliest. Higher domestic inflation could also threaten the recovery, particularly if the MPC was to sanction further increases in QE which could lead to sharp falls in sterling. This would harm our economy far more than the minor benefits to exports that a weak sterling would provide.
“Though the rebalancing of our economy towards exports is not yet sufficient, we have made more progress than people realise. The real trade deficit in goods and services has more than halved in the last three years, and the surplus in services has and will continue to play a key role in narrowing our trade gap. While we would like to see more growth coming from investment and net trade, we should not be too concerned that consumer spending is helping to drive the recovery — it is better to rely initially on the consumer than to have no growth at all.
“The MPC’s new strategy of forward guidance should also help to create a more stable economic environment, by combining adherence to the inflation target with commitment to low interest rates. We believe that the 7.0% unemployment threshold is likely to be reached nine months earlier than the Committee predicts, and we expect interest rates to go up early in 2016. This means that companies will still have a reasonably long period in which to plan and invest, which is good for business confidence.”