According to the BCC, the UK economy will shrink by 0.1% this year, less than the 0.4% it had predicted previously. Before we get too carried away by 0.3% less shrinkage (if it's possible to get excited by that), this is ‘entirely due to the stronger-than-expected’ growth in the last quarter, helped by the Olympic Games.
As such it echoes the sentiments of the Bank of England last month, which added a note of heavy caution to news that the UK economy had bounced back from recession in the three months to September, after a prolonged period of contraction. Outgoing Bank chief Mervyn King was forced to point out that much of this ‘recovery’ was down to the hoards of athletic types who came to London this summer to race each other and throw things (not his exact words).
Meanwhile his soon-to-be-former colleagues at the Bank have been painting a far starker picture. ‘In terms of the loss of incomes and outputs, this is as bad as a world war,’ Andy Haldane, the Bank’s executive director for financial stability said yesterday of the financial crisis. ‘If we are fortunate, the cost of the crisis will be paid for by our children. More likely it will still be being paid for by our grandchildren.’ [On a separate note, you can read Haldane's review of the best business books of the year here.]
Looking at the figures, such gloom is all too easy to believe. The BCC now sees growth of 1% for the whole of 2013, down from the 1.2% it had forecast in September. For 2014, the BCC cut the forecast to 1.8%, from 2.2%. It also said that public sector borrowing would be £104.1bn for 2012/13 – more than £12bn more that it had predicted in March.
It's against this backdrop that Chancellor George Osborne will be feverishly honing his spin for the Autumn Statement coming tomorrow. Over the weekend, he admitted that curbing the UK's financial deficit was ‘taking longer’ than planned. Which is a solid bit of truth-twistery given we’re still left looking at pre-2008 levels with misty eyes, as it suggests everything is still absolutely in hand, just not happening quite as speedily as they’d intended. Uh-huh.
Meanwhile the BCC said that the lower GDP growth forecasts for 2013 and 2014 were due to the fact that the ‘international environment has worsened, as growth forecasts for world trade, for the eurozone, and for other major economies have been revised down in recent months’ and that more spending cuts were likely in the UK. It says Osborne needs to be bold in his mini-Budget, to boost 'growth, job creation, exports, investment, and business confidence'. We can imagine George shrinking into his seat at the thought...