The British Chamber of Commerce (BCC) has joined the CBI in cutting its forecast for growth in the UK economy for the rest of 2012 and 2013.
The business representative has called on the Bank of England to invest in companies by buying loans as an alternative method fo trying to boost the economy.
The BCC warns that the government is already set to miss its fiscal target of reducing the budget deficit by the end of this parliament and that the golaposts have changed since the coalitions economic policy was initiated in the autumn of 2010.
It says decisive and quick action is needed to provide a near-term boost to the economy through stimuklating construction incentivising employers to recruit and supporting business investment. The BCC says this can happen without jeopardizing the UK's sovereign credit rating. It says the UK's status could be used to facilitate increased borrowing.
The BCC says that it expects the UK economy to contract by 0.4 per cent in 2012, rather than grow by 0.1 per cent as it had previously predicted. In 2013, it says the economy will grow by just 1.2 per cent, rather than 1.9 per cent.
The BCC is urging the government to implement an infrastructure programme to provide some dynamism and growth to the moribund economy.
Yesterday, the CBI also cut its GDP growth prediction for both 2012 and 2013. It says the economy will contract by 0.3 per cent in 2012, rather than grow by 0.6 per cent as it predicted in May. Like the BCC, the CBI says the economy will grow by 1.2 per cent in 2013.
In a blunt assessment of the impact that the coalition has had on taking the economy out of recession, John Longworth, Director General of the British Chambers of Commerce, said: “Since the election of the Coalition Government, the BCC has supported deficit reduction, and a relentless focus on creating the conditions for businesses to thrive. Two years on though, the UK economy is stagnating.”
Mr Longworth admitted that many factors are hampering the government such as the euro debt crisis, slowing global demand, increase in commodity prices and low business investment but said that businesses “need an enterprise-friendly government with bold policies if they are to drive recovery.”
The BCC supports the deficit reduction programme but said that it needs to work in tandem with “a hybrid strategy that delivers both deficit-reduction and growth.” The BCC says the cuts are required to maintain the confidence of the financial markets and to keep the UK’s triple-A status with the credit ratings agencies.
Mr Longworth said that the government has cut investment spending but that other types of government spending has continued to grow. The BCC says that it expects the Office for Budget Responsibility (OBR) to confirm that the government will miss its target of eliminating the budget deficit by 2016-17.
The BBC called on the government to create a dedicated business bank and for the Bank of England to provide more support for small businesses.
David Kern, BCC Chief Economist, analysing the revised forecast for the economy, said: “After reported GDP falls in recent quarters, we expect a bounce back in the third quarter of 2012.
“However, hopes of a strong upturn may be overstated. Anecdotal reports do not support hopes that the London Olympics provided a major boost to UK growth.
“We assume positive UK growth of 0.5% in Q3 2012, 0.3% in Q4 2012, and a gradual improvement during 2013 and 2014. But the UK economy will face major obstacles over the next few years.”
A Treasury spokesman said that the government was "doing everything it can to get the economy moving".
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