UK economy in Recovery but still faces huge risks


The British Chambers of Commerce (BCC) has published its September 2009 Economic Forecast and sees the UK moving into a more positive economic period, but warns we still face high risks.

The main features of the BCC forecast are:

  • The UK will see a large GDP decline of 4.3% in 2009, followed by positive growth of 1.1% in 2010 and 1.9% in 2011. In June we predicted a 3.8% GDP fall for 2009 and a small 0.6% increase in 2010.
  • The current recession - recording peak to trough declines of 5.5% - is much worse than the recession of the early 1990s. However, it is less severe than the early 1980s recession, when GDP recorded cumulative falls of 6.0%.
  • Further big increases in unemployment are expected, but at a reduced pace. Unemployment is likely to rise from 2.43 million to a peak of just over 3 million, or 9.6% of the workforce, in mid-2010. In June we predicted unemployment would hit 3.2 million.
  • Public sector borrowing is forecast to total some 12.5% of GDP in 2009-10 and 2010-11. Public sector debt is set to rise to dangerous levels in the next few years, in excess of 80% of GDP.
  • The BCC believes that the MPC will use the full £175bn allocated to the Quantitative Easing (QE) programme. Another increase in the size of the programme, to at least £200 billion, will probably be needed to ensure that the economy does not falter.

British Chambers of Commerce, Director General, David Frost, said:

"All the political parties must demonstrate that they recognise the vital role of wealth-creating businesses in driving a sustainable economic recovery."

"The UK’s recovery requires a thriving business sector, so it is vital that new business taxes, higher National Insurance contributions, and any measures that may damage enterprise and job creation are avoided."

"The painful but necessary reduction in government debt and borrowing, which will have to be implemented soon, should entail curbing public spending in all areas, except for vital business infrastructure expenditure. Given the perilous state of our public finances, we cannot afford to ring-fence other spending categories, no matter how desirable it may be. Reform of the public sector must be part of a credible plan to cut spending.”

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