The British Chambers of Commerce (BCC) has cut its forecast for economic growth this year to just 0.1%, down from its earlier prediction of 0.6%, and said that the country needs a “bold, enterprise-friendly government”.
According to the group, which represents more than 100,000 businesses across the UK, there will be minimal growth in 2012 but economic prospects will gradually improve, with growth of 1.9% expected in 2013. This is a slight increase from the previous prediction of 1.8%.
The UK’s Office for National Statistics (ONS) has said that gross domestic product (GDP) shrank by 0.3% in the first three months of 2012, confirming the double-dip recession after a decline of 0.3% in the fourth quarter of 2011. The BCC has questioned the assessment of the ONS, pointing out that most business surveys indicated positive growth in the first quarter and employment increased.
Nevertheless, GDP growth in the second quarter is likely to be zero or even slightly negative, because of the additional bank holiday for the Queen’s Diamond Jubilee. Growth is predicted to improve from the third quarter onwards.
The BCC believes that net exports and business investment will be important drivers of UK economic growth in the next two to three years. It said that the continuing problems in Europe are expected to persist “for some considerable time”, impacting on UK firms, but within the UK business investment is forecast to recover from 1.2% in 2011 to 4.3% in 2012, 7.3% in 2013 and 7.6% in 2014. Moreover, UK exports will grow more rapidly than imports in both 2013 and 2014.
A modest improvement in consumer spending is also expected to contribute to economic growth. UK household consumption registered a drop of 1.2% in 2011 but is set to return to positive territory with a rise of 0.7% in 2012, followed by 1.7% in 2013 and 2.1% in 2014.
John Longworth, Director General of the BCC, called for targeted measures to support economic growth and said that without action from the government the economy will continue to “bump along the bottom” for some time.
Among the measures he proposes are the creation of a business bank to provide capital to new and growing companies, as well as reduced regulation and greater investment in infrastructure, which could be privately funded or kick-started by the public sector.