BCC slashes growth ahead of autumn statement

The British Chambers of Commerce (BCC) on Monday slashed its forecast for UK economic growth ahead of Chancellor George Osborne’s autumn statement tomorrow.

The BCC, which has lowered if forecast four times, said It now expects to see growth of 0.9% for 2011 and 0.8% for 2012.

This estimate is revised down further from just two months ago when the BCC said growth would be 1.1 per cent for 2011 and 2.1 per cent for 2012.

The BCC said that the impact of the euro debt crisis was one factor but also pointed to the government’s austerity measures as contributing to the fall in growth.

The BCC said debt levels are still too high, that the process of de-leveraging will be difficult and will result in a sustained period of low growth. The BCC said it expected to see minimal growth for the next two quarters.

John Longworth, Director General of the British Chambers of Commerce, said: “The challenges facing the UK economy have grown in recent months. Uncertainty surrounding the eurozone will delay a significant upturn in growth until late in 2012. We expect inflation to fall sharply, which is positive news for businesses and consumers, but we will be faced with rising unemployment for some time to come.”

The organisation said that it expects to see further purchases of assets through quantitative easing to the tune of another £50 billion taking the total to £325 billion. However, the BCC urged the Monetary Policy Committee (MPC) to work with the government to support its planned policy of credit easing, details of which will be announced by the Chancellor in his autumn statement on Tuesday and to buy assets directly from businesses to ensure the funds get where they are required.

Also on Tuesday, the Office for Budget Responsibility (OBR) will publish its latest revision of UK economic growth forecasts for this year and next and is also expected to scale back its predictions for UK economic growth.

David Kern, Chief Economist at the British Chambers of Commerce, said: “The immediate outlook is challenging and, though we believe a recession will be avoided, the risks cannot be shrugged off. Our forecast indicates that GDP will only return to its pre-recession level in 2014, while consumer spending will only rise back to its pre-recession position in 2015.”

The BCC expects unemployment to rise to 2.77m next year, and for youth unemployment to hit 42 per cent next year

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