The British Chambers of Commerce (BCC) has slashed its forecast for UK economic growth this year, blaming the government’s austerity measures.
In its latest Quarterly Economic Forecast, the BCC dropped its economic growth forecast from 0.6% to 0.1%, following news that the UK has entered a double-dip recession.
“With negative growth in the first quarter of 2012, and renewed difficulties in the eurozone, we have downgraded our forecast for GDP in 2012 to 0.1%,” said David Kern, Chief Economist at the BCC.
“Though growth will return, it will be over a longer period than expected. GDP and consumer spending will only return to pre-recession levels in the second half of 2014 or early in 2015.”
The BCC, which represents more than 100,000 businesses in the UK, said that the eurozone crisis will have an impact on the British economy for the foreseeable future.
It has called on the government to stimulate the economy to improve growth, saying investment is vital to help businesses develop.
“Our new forecast underlines the need for bold action to deliver growth. Businesses are busting a gut in an uncertain environment, and they will need to continue to do so,” said John Longworth, Director General of the BCC.
“But if companies are to accept uncertainty as the new norm, then they must be met with a bold, enterprise-friendly government to enable them to grow in the long term,” he added.
The BCC called for new measures to kick-start economic growth, such as increasing spending on infrastructure and cutting red tape for business.
It also put forward proposals for a state-backed bank that would provide capital for small businesses, to help them grow and create jobs.
Despite reducing its forecast for this year, the BCC increased its outlook for 2013. It stated that GDP growth would be 1.9% in 2013, up from its previous forecast of 1.8%. It said it expects growth to be 2.4% in 2014.
However, it said that unemployment would continue to be a problem into next year. According to the BCC, unemployment will increase to 2.9 million – 9% of the workforce – by the third quarter of 2013.
It said that the primary driver behind the increase in unemployment rates, which could rise to 23% for 18 to 24-year-olds, was continued public sector spending cuts.
“Without government working together with business, the economy will continue to bump along the bottom for longer than we’d all like,” added Mr Longworth.