BCC says UK firms need more help to stay on track

THE British Chambers of Commerce (BCC) is calling for the upcoming Budget to include measures to stimulate growth as it downgrades its forecast for the UK economy this year.

In its latest quarterly economic forecast, published today, the BCC is cutting its prediction for UK GDP growth in 2012 to 0.6 per cent, from an already anaemic 0.8 per cent, but has ruled out the prospect of a “double dip” recession.

The downgrade comes despite a raft of positive data from key surveys which suggest that Britain will bounce back in the first quarter of this year and avoid a recession. The BCC expects modest growth in the current quarter, but points to difficulties facing firms in the year ahead.

BCC director-general John Longworth said the UK economy faces “serious challenges”, with problems in the eurozone creating difficulties for exporters, combined with dampened domestic demand.

“Our economic forecast underlines the need for the government to deliver a Budget that will bring confidence to businesses,” he said.

“The Chancellor must pull out the stops to enable British businesses to drive growth here at home.”

The BCC says George Osborne should stick to his “plan A” of reducing the public deficit, but believes better-than-expected borrowing figures for the current financial year have given him the “wriggle room” to implement measures to encourage firms to export, invest and grow.

It suggests reducing regulation, simplifying the planning system and improving the flow of credit could help to “squeeze every last drop of growth out of the UK economy”.

It is also calling on the UK government to scrap the “swingeing” 5.6 per cent business rates rise expected in April, which it said will aggravate chronic cashflow issues and threaten business survival.

Longworth said: “Only the private sector will drive recovery … A sustainable recovery depends on creating the right conditions to empower businesses to drive growth. Companies need the best possible environment to generate wealth and create jobs.”

The BCC’s downgrade to growth prospects comes after purchasing managers’ surveys showed the construction and manufacturing sectors expanded in both January and February. February data from the dominant services sector released today is also likely to be consistent with growth.

But some economists fear that the extra bank holiday for the Queen’s Diamond Jubilee and the impact on productivity of the London Olympics will hamper the recovery in the second and third quarters of 2012.

The BCC also said the stagnant economy will cause unemployment to grow by about 230,000 by the year end, to about 9 per cent, although prospects should improve in 2013.