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News - 11 March 2013

BCC cuts its UK growth forecast

The British Chambers of Commerce (BCC) has cut its economic growth forecast for this year to 0.6% from a previous prediction of 1%. UK manufacturers also said conditions remained difficult, with weak market conditions both home and abroad.

The latest predictions from the BCC also cut its growth forecast for 2014 from 1.8% to 1.7%. Its outlook for 2013 and 2014 is below the official forecasts from the Office for Budget Responsibility of 1.2% this year and 2% next year.

Despite its lower expectations for growth the BCC warned against greater economic stimulus from the Bank of England, calling any increase to QE "unnecessary and unduly risky".

Despite the growth downgrades, the BCC predicted that GDP would grow by 0.1% in the first three months of this year, which means the UK would avoid a triple-dip recession by a small margin.

"We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time," said David Kern, chief economist at the BCC.

"In addition, we now expect GDP to return to its pre-recession levels early in 2015, and the squeeze on living standards will continue for a while longer."

The Bank of England's (BoE) rate-setting committee has kept interest rates at 0.5% and rejected calls to inject more stimulus into the economy. The decision means the Monetary Policy Committee (MPC) has now kept rates at historic lows for four years.

There had been calls for the Bank to do more to support the economy and expand its quantitative easing (QE) programme. BoE governor Sir Mervyn King voted to increase the QE programme at the MPC's last meeting. He was among three MPC members who backed a £25bn increase in QE to £400bn, but was outvoted.

Tonmoy Kumar, Manager of the Accounts Department of ABDS comments:
"Sir Mervyn will be replaced by the current governor of Canada's central bank, Mark Carney, in July. The Chancellor George Osborne may well use this month's Budget announcement to give the new governor more power to get the economy growing again.”

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