UK economy improving during 2012, but challenges lie ahead

Wednesday 5 December 2012

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The British Chambers of Commerce (BCC) has made an upwards revision to its 2012 economic forecast, offering a boost to UK businesses.

After an improvement in economic conditions in recent months, the BCC now expects to see a -0.1 per cent growth rate for the year as a whole.

This is up from the organisation's previous forecast of -0.4 per cent, made in September 2012.

However, the BCC has made downwards revisions to its gross domestic product (GDP) growth forecasts for 2013 (1.2 per cent to 1.0 per cent) and 2014 (2.2 per cent to 1.8 per cent).

Deterioration in the international environment - not least in the eurozone - and the likelihood of further austerity measures has been blamed for the lower growth forecasts.

Sector by sector growth predictions

The BCC said that UK manufacturing remains strong, but output is set to fall by 1.1 per cent this year.

Growth is expected to return in the sector in 2013, with a rise of 0.8 per cent, followed by a one percentage point increase in 2014.

However, construction is predicted to fall by 8.9 per cent in 2012 and 1.4 per cent next year, before returning to growth with a 1.0 per cent rise in 2014.

More positively, service sector growth is forecast to reach 1.2 per cent in 2012, 1.4 per cent in 2013, and 2.2 per cent in 2014 - a stronger performance than the other sectors.

With the service sector by far the largest segment in the UK economy - accounting for 77 per cent of total output - this is surely good news for British business.

Combating the UK's economic challenges

John Longworth, director general of the BCC, said the economy still faces a number of challenges over the coming months and years.

"We have always been behind the Chancellor’s aim of reducing the deficit, but this has to be supported with the right conditions that allow businesses to thrive, or we will fail to see the growth the economy so desperately needs," he stated.

“The fact remains that growth is still too weak. Thankfully, we have businesses here in the UK that are ambitious, determined and resilient."

Mr Longworth said that many firms are expanding exports, investing, and creating jobs, but more must be done to support the aspirations of growing companies that will be the wealth creators of tomorrow.

He claimed that UK businesses want a hybrid strategy that delivers both deficit-reduction and growth.

"This requires a laser-like focus on the implementation of important growth measures, such as the delivery of key infrastructure projects across the UK and the creation of a business bank that heralds a radical and long-term change in the way that companies access finance," Mr Longworth claimed.

He said the government needs to show courage, imagination and leadership - putting the UK's economic priorities above politics.

This can make a real difference in transforming the economy so that Britain can lead the way on the global stage, Mr Longworth stated.

Posted by Steve Williams