The British Chamber of Commerce (BCC) has published its quarterly economic forecast, downgrading its prediction for UK GDP growth in 2011 and 2012.
A previous estimate of 1.3 per cent growth in 2011 has been reduced to 1.1 per cent, while prospects for 2012 have been similarly reduced from 2.3 per cent to 2.2 per cent.
Consumer spending is expected to fall by 1.0 per cent in 2011, double that of the previous forecast, while unemployment is now forecast to peak at 2.62 million in Q4 of 2012. The BCC expects interest rates to start rising around the same time.
“The challenges faced by the UK economy are more difficult than first thought at the beginning of the year,” said David Frost, Director General of the BCC.
“Growth will be slow, inflation will remain high, and the number of those out of work will increase. Despite this, there is no need for doom and gloom.
“We expect prospects to improve over the medium-term, and believe that the UK has the potential to recover and thrive. But this will depend on creating the right conditions for businesses to grow.
“We have to get the economy onto a more sustainable long-term footing and it is business that will help us achieve that.
“For the government, that means taking a serious look at the infrastructure that supports our businesses, from the education system to transport links, as well as reducing red tape and reforming the planning system, to allow firms to expand and grow.
“If we don’t get these policies right, we risk any recovery being weak and short-lived.”
The revised BCC figures follow a similar downgrading by the Bank of England, who last month reduced its GDP predictions to 1.4 per cent, down from 1.75 per cent.