The UK’s growth forecast for this year has been cut from 2.7 percent to 2.3 percent by a leading business group today.
The British Chamber of Commerce (BCC) has warned that that the UK’s economy is a ticking ‘timebomb’ thanks to a surging trade deficit. After a slow first quarter, the BCC downgraded the growth rate, but said it expected the slowdown to be temporary, Money.co. reported.
John Longworth of the BCC said: ‘It is always disappointing when we have to downgrade our growth forecast, but the unexpectedly low figures from the ONS on Q1 2015 make it unavoidable.
He added: ‘The one area of concern is the increasing trade deficit. The growth we see is built on consumer spend and this has been a systemic weakness for years.
“Despite good intentions, we are heading the wrong way. The trade deficit is an economic time-bomb waiting to go off. We have to confront it head-on and that means getting more of our businesses exporting their goods and services overseas.”
The group said it also expects interest rates to rise from 0.5 percent to 0.75 percent in the second quarter of next year.
Slowdown Temporary
David Kern of the BCC said: “In spite of the downgrading of our 2015 growth forecast, UK prospects remain solid overall. The slowdown this year is likely to be temporary. Earlier falls in oil, food and other commodity prices continue to support UK growth, and Britain’s flexible and vibrant labor market is a major source of strength for our economy.”
He added: “Our new forecast suggests that we will remain near the top of the G7 league table over the next three years.”
The BCC’s economic forecast sees earnings growth accelerating over the next three years, but youth unemployment remaining high and the trade deficit rising.
Total pay including bonuses are predicted to increase by 2.4 percent this year and 4 percent in 2016, the group said.
By 2018, the BCC suggests that youth unemployment in the UK will still be ‘high’ at 18 percent.
