The British Chambers of Commerce (BCC) released a report stating that the economic recovery of United Kingdom is going to be slower than expectations and it will need some support from the Government, mainly through a business investment program. The 2013 growth forecast was cut to 1% from the earlier estimated 1.2% by BCC. Similarly, the 2014 expected growth is now projected to be 1.8%, less than the earlier prediction of 2.2%. The reasons mentioned by BCC for lowering the estimations are: possibility of a fiscal tightening of British Government and the weaker global economy backdrop. Another report released by the Markit Economics stated that the construction output of United Kingdom has plummeted highly in last month, mainly because of the plunge in both confidence and orders.
The economic statement of BCC will be delivered to the Parliament by George Osborne, Chancellor of the Exchequer. Osborne is also expected to cut the different Government Departments’ budgets so that the capital spending plan worth $8 billion can be funded. Steve Field, the spokesperson of British Prime Minister David Cameron confirmed this news.
According to John Longworth, the Director General of BCC, the growth in UK is pretty weak. He added that the country has always been behind the aim of deficit reduction and it’s time for the Government to take proper steps and allow foreign businesses to operate in United Kingdom, thereby boosting the economic growth.
In 3rd quarter of 2012, the British economy has experienced a growth of 1%. Incidentally, the boost happened mainly because of some onetime factors such as London Olympics. The Bank of England predicts that the gross domestic product will fluctuate a bit and may even see a contraction in the last quarter.
According to the forecast of many analysts, BOE will not restart the gilt purchases. They advised that adding to quantitative easing should be considered only if some new threats emerge and try to cause any trouble to UK banking system’s stability. Many believe that rather than gilt purchases, BOE should focus more on purchasing private sector assets.
The British Monetary Policy Committee will start a 2-day meeting on tomorrow and according to forecasts, the target for purchases will be kept at the current level, worth $603 billion. The Bank of England will be announcing the final decision on 6th December.