Economy poised to bounce back, says BCC

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THE UK ECONOMY is set to avoid recession this year, according to a new survey, with signs of recovery beginning to appear even in the struggling manufacturing sector.

Evidence from the British Chambers of Commerce (BCC) quarterly survey - the most comprehensive study of its kind - suggests the economy has turned the corner, analysts said. Growth in the first quarter is still expected to be weak, but the economy is well positioned to bounce back later in the year.

Neil Parker of Royal Bank of Scotland said: "This shows we are over the worst of the turmoil. It's time to get optimistic about the UK economy."

Activity was subdued throughout much of Britain during the first three months of the year, the BCC said. Manufacturing sales to the domestic market, for example, were at their lowest level since the end of the last recession.

However, leading indicators of economic activity - such as manufacturers' order levels - were significantly improved. This suggests growth will pick up markedly as the year goes on.

The survey results for the services sector were particularly healthy. The sector as a whole reported positive UK sales growth for the first time in a year, while service exports expanded for the first time in six months. As with the manufacturing sector, the BCC survey found evidence of sharply improved business confidence.

In the City, gilts fell as traders scaled back their expectations of further interest-rate cuts. The pound strengthened against the euro to close at 66.53p.

Despite the upbeat tone of the survey, Dr Ian Peters, BCC deputy director- general, called the recovery "fragile" and urged the Bank of England to cut interest rates by a further quarter-point next month. He said: "The important thing is not to get carried away. The onus on the Bank must now be to nurture this fledgling upturn."