Nov. 28 (Bloomberg) -- The British Chambers of Commerce cut its U.K. economic growth forecasts and said the risk of another recession “cannot be shrugged off,” predicting the Bank of England will add to its bond-purchase plan early next year.
Gross domestic product will increase 0.9 this year, 0.8 percent in 2012 and 1.8 percent in 2013, compared with previous forecasts of 1.1 percent, 2.1 percent and 2.5 percent respectively, the London-based lobby group said in an e-mailed statement today.
It predicted the Bank of England will expand its stimulus program by 50 billion pounds ($77 billion) to 325 billion pounds.
“The worsening euro-zone debt crisis and the fiscal austerity will have a more serious impact on the U.K. economy than previously predicted,” BCC Chief Economist David Kern said.
“With U.K. growth likely to be minimal in the next 2-3 quarters, and with the euro zone likely to record negative growth in the near future, we expect the Monetary Policy Committee to increase the quantitative-easing program further early in 2012.”
Bank of England policy maker Martin Weale said on Nov. 25 that the U.K. is experiencing the slowest recovery since World War I and that the central bank’s inflation forecast may support the case for more stimulus next year.
Still, the BCC said the government should stick to its planned fiscal squeeze to maintain its credibility and defend Britain’s top credit rating.
The BCC said the central bank may need to diversify its asset purchases beyond government bonds and “actively support” Chancellor of the Exchequer George Osborne’s proposed credit- easing program, which is designed to aid small companies struggling to get bank loans.
Private Assets
“Higher QE on its own will not achieve its full potential without effective measures that would to improve to the flow of credit to businesses,” Kern said. “We believe the MPC should reassess its reluctance to purchase private-sector assets.”
The EEF engineering lobby group said in a separate report today that the cost and availability of credit for businesses is deteriorating.
The balance of companies reporting an increase in the overall cost of finance rose to 17 percent in the fourth quarter from 12 percent in the previous three months, according to the survey of 272 companies, which was carried out Nov. 3-23.
The Confederation of British Industry said in a report that sales at consumer and business services companies fell in the past quarter. The decline in the volume and value of sales at consumer-service companies was the fastest since May 2009. Its survey questioned 189 companies between Oct. 28 and Nov. 16.
The Lloyds Bank Corporate Markets Business Barometer showed that prospects for the economy have continued to worsen in the past month, with output expected to stagnate in the fourth quarter and contract in the first three months of 2012.
businessweek.com
Gross domestic product will increase 0.9 this year, 0.8 percent in 2012 and 1.8 percent in 2013, compared with previous forecasts of 1.1 percent, 2.1 percent and 2.5 percent respectively, the London-based lobby group said in an e-mailed statement today.
It predicted the Bank of England will expand its stimulus program by 50 billion pounds ($77 billion) to 325 billion pounds.
“The worsening euro-zone debt crisis and the fiscal austerity will have a more serious impact on the U.K. economy than previously predicted,” BCC Chief Economist David Kern said.
“With U.K. growth likely to be minimal in the next 2-3 quarters, and with the euro zone likely to record negative growth in the near future, we expect the Monetary Policy Committee to increase the quantitative-easing program further early in 2012.”
Bank of England policy maker Martin Weale said on Nov. 25 that the U.K. is experiencing the slowest recovery since World War I and that the central bank’s inflation forecast may support the case for more stimulus next year.
Still, the BCC said the government should stick to its planned fiscal squeeze to maintain its credibility and defend Britain’s top credit rating.
The BCC said the central bank may need to diversify its asset purchases beyond government bonds and “actively support” Chancellor of the Exchequer George Osborne’s proposed credit- easing program, which is designed to aid small companies struggling to get bank loans.
Private Assets
“Higher QE on its own will not achieve its full potential without effective measures that would to improve to the flow of credit to businesses,” Kern said. “We believe the MPC should reassess its reluctance to purchase private-sector assets.”
The EEF engineering lobby group said in a separate report today that the cost and availability of credit for businesses is deteriorating.
The balance of companies reporting an increase in the overall cost of finance rose to 17 percent in the fourth quarter from 12 percent in the previous three months, according to the survey of 272 companies, which was carried out Nov. 3-23.
The Confederation of British Industry said in a report that sales at consumer and business services companies fell in the past quarter. The decline in the volume and value of sales at consumer-service companies was the fastest since May 2009. Its survey questioned 189 companies between Oct. 28 and Nov. 16.
The Lloyds Bank Corporate Markets Business Barometer showed that prospects for the economy have continued to worsen in the past month, with output expected to stagnate in the fourth quarter and contract in the first three months of 2012.
businessweek.com
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