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UK economy to slow in 2011

by: IFAonline
  • 06/12/2010
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UK economy to slow in 2011
The economy will grow by less than expected next year, but growth in 2012 will be better than predicted, the British Chambers of Commerce has forecast.

It downgraded its forecast for the UK’s GDP growth in 2011 from the 2.2% it predicted in September to 1.9% now, the BBC reports.

The BCC blamed the downwards revision on the eurozone debt crisis, austerity cuts, weak housing market and VAT rise from 17.5% to 20%.

The Office for Budget Responsibility (OBR) recently downgraded its 2011 growth forecast from 2.3% to 2.1%.

But the BCC was even more bearish, suggesting year-on-year growth will slow from 3% in the final quarter of 2010 to 1.4% in the second half of next year.

But it said the economy was sufficiently robust to avoid slipping back into recession – and was more upbeat moving forward because of private sector growth.

It upgraded its GDP growth forecasts for 2012 from 1.8% to 2.1% – but that was still significantly lower than the OBR’s 2.6% estimate.

BCC director general David Frost said: “British business is willing and able to drive the recovery, but it can only do so if the government will back its words with deeds.

“The government must avoid at all costs new business taxes and measures that damage initiative, enterprise and innovation.”

He predicted the Bank of England will keep interest rates on hold at 0.5% next week and will continue to hold them at historically low levels until at least the second half of 2011.

The UK economy grew by 0.8% between July and September, but most economists expect this rate to slow once the government’s austerity measures kick in.

 

 

 

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