Both the British Chambers of Commerce (BCC) and the Confederation of British Industry (CBI), which together represent about 300,000 UK firms, have shot Britain’s chances of growth this year to pieces.
The BCC now warns that output will shrink by 0.4% in 2012 as the eurozone crisis drags on and food and oil prices continue to rise. Just three months ago it had predicted the economy would grow in 2012 (albeit by a whisker at 0.1%.) Next year’s outlook is looking rosier with a predicted 1.2% growth in GDP, the BCC says – but it is a drop from the 1.9% estimate made in June.
‘Politicians need to get some political backbone and show leadership,’ the BCC’s Director General John Longworth urged, demanding immediate action to lift the UK out of recession. Giving companies bigger tax breaks for spending on plant and machinery would be one way to break the ‘vicious cycle of stagnation,’ the BCC said. The group is also calling for National Insurance contributions to be lowered to encourage job creation and is calling for the government to stimulate construction to kick-start the stagnating housing sector.
But the BCC continued to back the government’s austerity measures (the government is hoping to reduce the deficit by squeezing the public sector and using the money to boost investment.)
The CBI has also given a gloomy diagnosis of Britain’s financial health. The group expects a 0.4% contraction this year, but says growth will pick up by 3.5% in 2013. ‘The underlying reality of the economy is undoubtedly pretty flat,’ the CBI’s director-general John Cridland warned.
But on a brighter note the CBI said inflation, which is expected to fall back to close to its 2% target in coming months, will help ease the pressure on household finances.