UK faces double-dip, says BCC

City A.M. Reporter
BRITAIN faces the risk of a double-dip recession and the government should hold off making big spending cuts until the recovery is assured, according to the British Chambers of Commerce.

In its latest economic forecast published at the weekend, the business lobby group revised up its projection for growth this year to 1.3 per cent from 1.0 per cent in its March forecast. However, it has nudged down its expectations for 2011 growth to 2.0 per cent from March’s downwardly-revised 2.1 per cent.

“The recovery is still weak, and it would be unwise to disregard the threat of a double-dip recession,” said BCC chief economist David Kern.

“The crisis in the Eurozone and turmoil in the global financial markets threaten to dampen the UK’s growth prospects.”

Around half of all British exports go to the Eurozone and tough austerity measures being taken by some of the currency bloc’s most highly-indebted nations could severely dent demand for British goods.

Kern applauded the new UK government’s determination to tackle a budget deficit of almost 11 per cent of GDP, but warned that going too far too soon risked derailing the recovery.

“Significant additional fiscal tightening -- beyond the £6bn pounds already announced -- should only be implemented when the recovery is definitively more secure,” Kern said.