Strong services sector prompts BCC to raise growth forecasts
THE UK’s economy is set to grow faster than expected over the next three years supported by a strong services sector and increased exports, the British Chambers of Commerce has said.
The BCC has consequently upgraded its UK growth forecasts from 0.9% to 1.3% in 2013, from 1.9% to 2.2% in 2014, and from 2.4% to 2.5% in 2015.
In its Q3 economic forecast, the business group warns that while the upgraded figures are encouraging, the recovery is still not secure and many challenges remain. It has urged the government and the MPC not to become complacent, and to do everything in their power to ensure the economic recovery moves from good to great.
The upward revision is mainly due to the stronger than expected Q2 2013 GDP growth (0.7%), a strong service sector as demonstrated by its recent Quarterly Economic Surveys, and household consumption.
A larger improvement in the trade balance than predicted in Q2 also counts towards the upward revision. The BCC said its own surveys have shown that export activity among its members is at record levels, reflecting the better figures seen in recent months.
UK GDP growth is forecast to average 0.5% per quarter in the second half of 2013 and the first half of 2014, before a slight upturn to 0.6% per quarter in the second half of 2014 and during 2015.
John Longworth, Director General of the BCC, said: “The improved outlook is testament to the steadfast determination shown by businesses in previous quarters, who have consistently displayed confidence in the face of unwarranted pessimism over the economy.
“Unfortunately however the recovery is not yet secure. We have had false dawns in recent years and although this upturn appears to be on stronger ground, we must be aware that complacency could lead to setbacks. There are many external factors, such as the Eurozone, the Middle East, and the Chinese economy that could halt our progress. However our surveys have shown that firms are confident about their prospects and want to expand, but they cannot do it alone.
“Improving access to finance for viable, fast-growing businesses is a major priority, and the government and the MPC must do more to ensure that vibrant SMEs can obtain finance on reasonable terms. The government must also work with the Bank of England and the Treasury to underwrite private sector investment in infrastructure projects, and our ‘have a go’ exporters need support on the ground to help them break into new markets.”
He added the government could not afford to divert attention away from growth, and had to adopt measures to foster an enterprise-friendly environment in which businesses could continue to create jobs, invest and export.
“Only by doing this will we encourage the optimism and move our economy forward from good to great,” he said.
