The British Chambers of Commerce has called for more government spending on infrastructure as it predicted that UK GDP would shrink by 0.4% in 2012.
The British Chambers of Commerce has called for more government spending on infrastructure as it predicted that UK GDP would shrink by 0.4% in 2012.
The BCC also cut its forecast for 2013, from 1.9% to 1.2% growth. The industry body said the eurozone crisis and a sharp rise in food and oil prices posed a continuing threat. The BCC also backed other growth-enhancing measures, such as creating a business bank and Bank of England support for small business borrowing. But it said that the Chancellor George Osborne should press ahead with cuts in benefits, the state pension and the civil service, which it said were needed to retain the confidence of financial markets.
Only three months ago, the BCC had been expecting the economy to eke out 0.1% growth this year. But it said it had to slash its forecast in light of the weak growth data for the second quarter of the year since released by the Office for National Statistics (ONS) The decision echoed a similar move by the CBI, to cut its 2012 forecast on Thursday to a 0.3% shrinkage. Nonetheless, the BCC suggested that the ONS' economic growth data may be too gloomy and could be revised upwards, as it conflicted with more rosy jobs and industry data from the same period.
However, weak growth in the eurozone and rising oil and food prices - in particular a jump in corn prices due to the current drought in the US - had induced the BCC to cut its forecast for next year. Despite the uptick in food and energy prices, inflation was expected to stabilise around 2.5%. Lower inflation will hopefully result in increased bank lending and reduce the number of those seeking finance suffering a mortgage application declined.
