British Chambers of Commerce (BCC) upgrades UK GDP growth forecast Sheffield Chamber of Commerce reaction
11th March 2015
The BCC has upgraded its UK GDP growth forecast for the next two years, from 2.
6% to 2.7% in 2015, and 2.4% to 2.6% in 2016, due to stronger than expected growth in household consumption and services. The latest forecast also makes the BCC's first prediction for UK growth in 2017 - at 2.6%. ECONOMIC FORECAST OVERVIEW The BCC is upgrading its UK GDP growth forecast from 2.6% to 2.7% in 2015, from 2.4% to 2.6% in 2016 - and introducing its first-ever forecast for 2017 at 2.6%. Quarterly GDP growth is expected to increase to 0.7% in Q1 2015, compared with 0.5% in Q4 2014. The main underlying reasons for expecting stronger growth are: 1) the stimulatory effects, global as well as domestic, of lower energy and food prices: and 2) the prospect that interest rates will remain very low for longer than we previously predicted. The first in increase in UK official interest rates, to 0.75% is expected no earlier than Q1 2016, two quarters later than the BCC previously predicted. UK business investment is expected to grow 3.5% in 2015, compared with 6.8% in 2014 - largely due to two consecutive quarterly declines in Q3 and Q4 2014. However, business investment is expected to grow 7.2% in 2016 and 7.4% in 2017. Exports are expected to increase by 3.7% in 2015, and 2.6% in 2016 and 2017. Productivity will remain weak in the next few years, increasing at a pace that is considerably slower than before the financial crisis. Low productivity is a serious medium-term challenge. While there has been medium-term progress, our net position recorded mixed movements in the past year. In real terms, the trade deficit widened from 2.2% of GDP in 2013 to 2.7% in 2014. In nominal terms the trade deficit narrowed from 2.0% in 2013 to 1.8% in 2014. Sheffield Chamber executive director Richard Wright said: -Certainly these forecasts on the headline growth figures will be presented as good news and we should acknowledge that. -There is always a 'but' though and, in truth, these figures show that while we are getting slightly better we are by no means recovering and if we stay like this the 'cuts' that large swathes of the public sector are dealing with are here to stay for longer than we want, or expect. We will not get out of trouble over the medium to long term with a domestically driven recovery. -Growth in GDP is NOT recovery. Reversing the trade deficit and starting to pay off the national debt is. The predicted growth in exports and productivity are not going to be enough to achieve that reversal unless something really changes. That is why the trade deficit has widened in real terms. We have performed abysmally in growing exports at a fast enough rate over many years despite massive amounts of money being invested in organisations like UKTI (United Kingdom Trade and Investment). -When I go to many developing places in the world Germany and China are there (and have been for some time) but we aren't. The recent development of the Overseas Business Networks (OBNs) focused purely on trade were a great thing because they were removed from the political activities in the embassies but their development and control should have remained in the private sector, rather than been pulled back into UKTI. -We need a much more focused commercial approach to this if we really want to change things and move past the box-ticking type programmes that have clearly not worked in the past.