The BCC has cut its forecast for UK GDP growth for 2012 from 0.8% to 6.0% and called on the government to introduce ‘modest fiscal stimulus’ if public sector borrowing is under target.
“With public sector borrowing likely to undershoot the OBR forecast by approximately £8bn, a fiscal stimulus totalling some £4bn would be consistent with maintaining strong UK market credibility and would not endanger our AAA-credit rating,” said David Kern (pictured), chief economist at the BCC.
“The critical priority is to sustain growth while cutting the deficit.”
The BCC said that a contraction of 0.2% in Q4 2011 showed the challenges facing the UK, but it added that fears of a further decline in Q1 2012 have eased.
The group has stuck to its 2013 prediction of 1.8% GDP growth.
Predicting weak GDP of around 0.2% to 0.4% in total in the first two quarters before growth strengthens later in 2012, the BCC said that annual CPI inflation will stand at 2.7% in 2012 and 1.9% in 2013.
In addition, the BCC has pushed out when it believes base rate will begin to rise, from Q1 2013 to the final months of next year, with no increase in the Bank of England’s quantitative easing programme “at least until Q4 2013”.
The BCC said that, as well as introducing a credit easing programme, the Chancellor’s upcoming Budget should scrap the 5.6% business rate rise expected in April 2012; consider the creation of an SME bank to improve the flow of credit to suitable businesses; and encourage private investment in infrastructure through the National Infrastructure Plan.
