Worst of recession is over but recovery not guaranteed, says Chamber

THE worst of the recession could be over, according to the latest quarterly survey from the British Chambers of Commerce.

The Chambers’ second quarter survey, taking data from more than 5,500 companies, shows progress in both the manufacturing and service sectors with most key indicators improving in the last quarter.

Although almost all the critical measures remain negative and many are still weak by historical standards, the period saw a marked strengthening in confidence following sharp declines over the previous two quarters.

Turnover confidence entered positive territory for the first time since the third quarter of 2008 and it improved dramatically for manufacturing firms, rising 40 points from -38 in the first quarter to +2 in the second quarter.

Despite these gains the BCC continues to predict unemployment will reach 3.2 million – some 10% of the workforce – by mid 2010.

It also warned there is a risk that without a continued focus on limiting the impact of recession, the economy could drop-off suddenly, adding weight to the argument that we are heading towards a W-shaped recession.

It said that further corrective measures are still needed to support the economy and added that quantitative easing should be pursued aggressively.

David Kern, Chief Economist at the BCC, said: “With cashflow, capacity utilisation, and price pressures remaining weak, it is important that the short-term policy stance stays expansionary.

“At the same time, sustaining any future recovery and preserving Britain’s international credit rating, depends heavily on the adoption of a credible medium-term strategy for improving our public finances. To avoid undue damage to our productive base, painful cuts to spending programmes must be the main tool for repairing our public finances.”

Chris Fletcher, deputy chief executive for Greater Manchester Chamber, said:  “These results mirror what our members have been telling us: that there is a more confident feel to the economy and the rate of decline has slowed down. However it would be foolhardy to attempt at this stage to predict that we are out of the worst just yet.

“The feeling in the economy is still very fragile and many businesses are still being cautious with their approach. Whilst to have some positive looking results will give a lift to everyone, the day to day battle still goes on and it is absolutely vital that the government doesn’t assume we have reached the end of the recession and normal service has been resumed. The full recovery will take a lot longer than this to achieve and there are still potential pitfalls along the way.”