The 2013/06/18 at 08:12
Stéphanie Salti, in London
For the first time since the onset of the financial crisis in 2008, the body in charge of British Chambers of Commerce, the BCC, has scaled up growth forecasts for the British economy for the next three years. The BCC is now backing 0.9 % growth for this year, instead of the 0.6 % it has been envisaging until now, then 1.9 % in 2014 (1.7 % previously expected) and 2.4 % in 2015. These new growth forecasts reinforce the idea of a recovery of the British economy, which, in the first semester of 2013, recorded 0.3 % in growth.
The services industry is expected to assure sustainable recovery of the British economy, with growth of 1.8 % expected for this year, then respectively 2.3 % and 2.5 % in 2014 and 2015. “The upward revision in our growth forecasts is encouraging,” comments John Longworth, Director General of the BCC. “Unfortunately, this does not change the fact that economic growth is still too weak, and the pace of recovery will remain unduly slow for a while yet.” The BCC hopes that the Spending Review, to be presented by the Chancellor of the Exchequer this month, will be an occasion to announce new support plans for businesses.
John Longworth therefore backs up the position of the International Monetary Fund (IMF) that urged the British government, at the end of May, to support infrastructure projects. For recovery may be extremely fragile, especially if households continue to not consume due to unemployment. According to the BCC, the number of unemployed persons is to reach 2.650 million in the third quarter of 2014, in other words 50,000 more than anticipated in March, and a total of 8.1 % of the workforce. To compensate for this situation, the continued decline of inflation figures, awaited from the third quarter of 2013 onwards, is expected to give support to consumption: the BCC is backing around 1.3 % growth in household expenses in 2013, then 2 % in 2014 and 2.4 % in 2015.
The Eurozone crisis should continue to have a long-term impact on British exports and the BCC anticipates a 0.5 % drop in volume this year. “The two main risks facing our forecast are worsening Eurozone prospects and an upturn in UK inflation, which would squeeze real incomes and could harm growth,” explains David Kern, BCC Chief Economist. “Any attempts to boost exports by encouraging a weaker pound (such as extending QE) could prove counter-productive as the damage caused by imported inflation is likely to outweigh the small benefits to exporters,” he concludes.