Recovery on track, firms say

THE UK economy is on the road to recovery but is still at risk of a &ldquo;relapse&rdquo;, the British Chambers of Commerce (BCC) said yesterday.<br /><br />The BCC said in its September 2009 Economic Forecast that rallying stock markets, fiscal stimulus measures and sharp falls in sterling would support an initial upturn.<br /><br />David Kern, chief economist at the BCC, said: &ldquo;The upturn in the economy has probably already started and we could see a relatively strong bounce-back in the next few quarters. But sustaining the recovery will be very challenging and the risks of a relapse are high.&rdquo;<br /><br />Despite revising down its June GDP forecast for 2009 from a 3.8 per cent fall to a 4.3 per cent drop, the BCC increased its 2010 prediction from GDP growth of 0.6 per cent to 1.1 per cent.<br /><br />Unemployment is set to increase but will rise at a slower pace to reach a peak of three million, or 9.6 per cent of the UK workforce, in mid-2010.<br /><br />But the BCC warned that public sector borrowing would hit 12.5 per cent of GDP in 2009/10 and 2010/11, adding that the Bank of England was likely to extend its quantitative easing programme from &pound;175bn to &pound;200bn.<br /><br />Kern also warned the UK&rsquo;s international credit rating would be under threat unless measures were taken to curb fiscal deficits and debt in the medium-term.