BRITAIN’S economic recovery is rapidly running out of steam and the government and the Bank of England will need to take robust action to prevent a double-dip recession, the British Chambers of Commerce (BCC) will warn today.
The BCC’s quarterly economic survey showed that the UK economy slowed considerably in the three months to September following unusually strong growth recorded in the second quarter.
Although manufacturers were at their most confident about revenues since the third quarter of 2007, their profitability confidence declined by three points to 23 per cent.
Results from the service sector showed performance to be worse than the manufacturing sector, with key indicators such as employment expectations and investment all slowing.
David Kern, chief economist at the BCC, said: “The dismal performance of the service sector is particularly disturbing, since it occurs even before VAT is due to rise to 20 per cent and before the full impact of the tough deficit-cutting measures takes effect.”
The BCC’s director general David Frost said that the focus should shift from cuts to supporting UK economic growth. He also added that the government would need to support capital investment in crucial infrastructure projects.
The BCC is also calling for supportive policies from the Bank of England to reduce the risks of a renewed setback in the recovery.
Kern warned: “The MPC should seriously consider increasing the quantitative easing programme to £250bn before the end of 2010 to enhance the economy’s ability to cope. Reducing threats of a double-dip recession must be the main policy priority.”
Bank of England MPC member Adam Posen echoed this sentiment in a speech two weeks ago.