Economic doom-mongers too focused on City of London, says BCC chief

Published on Saturday 26 April 2008 14:36

MOST businesses in Britain are managing to escape the effects of the credit crunch, the director-general of the British Chambers of Commerce, David Frost, will argue tomorrow.

In a wake-up call to policymakers, Frost will tell the chambers' annual convention that too much attention is paid to the turmoil in London's financial centre and that businesses in the rest of the country are operating normally.

He will reveal the results of a Populus poll showing 60% of UK businesses do not feel the credit crunch has affected their ability to raise new funds this year. Nor has it forced them to shelve expansion plans.

"If you lived your life in London you would often be left with the impression that the economy was about to fall off a cliff. From my visits around the country I can assure you it is not," he will tell the gathering of politicians and business leaders in Liverpool.

While businesses located outside the City are aware of the challenging economic forecasts for the next 12 months, most are unaffected and have a positive outlook, Frost will say.

"We are not seeing large-scale unemployment, and the weakness of sterling means our export market is doing well. The economy is holding up."

He will urge the Government to drop its obsession with financial services and the City to ensure the UK has a more balanced economic outlook.

In particular, Frost will make the case for a greater focus on exports and less reliance on a consumer economy. "We are running a trade deficit of 50bn. This cannot continue. We need more focus on trade promotion.

"Changes to UK trade and investment over recent years have not been helpful."

But Frost's forecast will contrast with stark warnings from economists who say the unrest in the financial markets will soon spread to the rest of the economy. According to Ian Stewart, associate director of research at Deloitte, there is a time lag before changes in the financial markets transfer to the 'real economy'.

"Economists are expecting a slowdown and they think it is going to be worse than they had anticipated," Stewart warned earlier this year.

Figures published by the Office for National Statistics on Friday showed the UK economy grew at its slowest pace for three years during the first quarter of 2008, driven by a slowdown in the services sector and a poorer performance from mining and quarry companies.

The Government predicts the economy will grow by between 1.75% and 2.25% this year, but most economists are less optimistic, forecasting growth of just 1.7%.