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The BCC’s head of economics, Suren Thiru, tells IGTV’s Victoria Scholar why a gloomy outlook on the UK economy is meant to serve as a wake-up call to the British government.
The UK economy is poised for its worst calendar year of growth since 2009, according to the British Chambers of Commerce (BCC). In its quarterly economic forecast, the business group downgraded its outlook for UK economic growth for 2018 to 1.3% from 1.4%, and also cut its outlook for 2019 growth from 1.5% to 1.4%. Consumer spending, business investment and trade forecasts were downgraded.
The BCC expects service sector output growth to slow to 1.2% in 2018, which would be the weakest level since 2010. The report said that disappointing consumer spending is likely to hit consumer facing industries like retail and hospitality. The construction sector is forecast to come under significant pressure, slowing from 5.7% growth in 2017 to 0.7% in 2018. In an interview with IGTV, BCC’s head of economics, Suren Thiru said, ‘what is actually underlying the below average growth has been the failure to deal with some of those longstanding issues, so weak productivity, the imbalances in our economy, overreliance on consumer spending and services to drive growth’.
This week the Bank of England (BoE) is widely expected to keep rates on hold, with a rate hike in August in the balance, according to market expectations. Thiru told IG, ‘during a period of both economic and political uncertainty, what the Bank of England should be doing is providing monetary stability’. He added that with growth and inflation coming down, ‘the case for increasing rates is really limited at the moment’ and accused the central bank of ‘sending out mixed messages’.
The UK’s net trade position is expected to worsen over the next few years, according to the BCC. Exporters are expected to ‘struggle to recover the ground lost in the year so far, as growth in key markets moderates’. A possible trade war is among the reasons cited for the BCC forecasts to suggest that ‘the economy is in a torpor’. When asked about the potential impact of global trade tension and increased protectionism, Thiru told IG ‘it is certainly a concern’. He said if trade tensions become more widespread then could hurt UK exporters and business investment, which could in turn weigh on confidence.
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