UK economy to shrink less than expected in 2012, says BCC

Big Ben

The British Chambers of Commerce (BCC) has released a more optimistic view of the UK’s economic performance for 2012, but still expects the economy to shrink.

In its first upward revision since March 2011, the BCC said today that it has raised its growth forecast for 2012 from -0.4% to -0.1%. At the same time, however, the organisation has downgraded its predictions for 2013 and 2014.

The BCC now expects to see positive but modest growth of 1.0% in 2013 and 1.8% in 2014 as the UK experiences a protracted recovery from the financial crisis.

In September 2012 the business group predicted that the UK economy would contract by 0.4% in 2012, followed by growth of 1.2% in 2013 and 2.2% in 2014.

Official statistics released in late October showed that the UK economy emerged from nine months in recession in the third quarter of the year, with GDP growing by an estimated 1.0% compared with the second quarter.

Other figures released today pointed to a cautious approach by shoppers ahead of the key Christmas season.

The BRC-KPMG Retail Sales Monitor for November 2012 shows that UK retail sales values were up 0.4% on a like-for-like basis from November 2011, when they were down 1.6% on the preceding year. David McCorquodale, head of Retail at KPMG, commented that the like-for-like indicators in both food and non-food were positive, but only just, against a weak set of comparatives last year.

“It appears that consumers know they have to spend before Christmas but are holding off for as long as they can to see if there might be bargains available in the next few weeks,” he added.

Sales of food and groceries in early November were boosted by Halloween and Bonfire Night celebrations, but sales tailed off as November progressed and consumers reassessed their finances with Christmas coming up.

This caution was also reflected in the figures for online sales in November, which grew by 7.5% compared with November 2011 but showed no material pick-up from October.

According to Stephen Robertson, director general of the British Retail Consortium, consumers are conscious that there will be a full shopping weekend immediately before Christmas, so retailers are holding their nerve and counting on a last-minute rush in the crucial final weeks.

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