BCC urges further stimulus over fears of stalling UK growth

One of the country's leading business organisations has warned the government that its plan to reduce the Budget deficit will take longer than expected because growth will be slower than the official estimates and may even "fizzle out".

The British Chambers of Commerce (BCC) will say today that the Government must "balance" its drive to reduce borrowing with policies that stimulate business and create jobs. David Frost, director general of the BCC commented: "The economy is still facing difficult challenges in the years ahead. Although growth will be slow, the government is right to persevere with its plans to cut the deficit."

Yet, he added: "This must be balanced with policies that allow business to drive the recovery. The Budget was a positive start, but the Government has more to do if the private sector is to create new jobs, invest and export and contribute to a lasting economic recovery in the UK."

In its latest economic forecast, the BCC said the economy will grow by just 1. 3 per cent this year and by 2.2 per cent in 2012, against previous estimates of 1.4 per cent and 2.3 per cent respectively.

This follows similar downgrades from the OECD and the IMF, and a growing consensus that the already tentative recovery may be even slower than previously thought.

Over the past six months the UK economy was stagnant, according to the latest date from the Office for national Statistics. Were it not for a relatively good performance on international trade, the UK would be back in recession. The BCC believes unemployment will peak at 2.6 million in the middle of next year – another 150,000 jobless on the current total.

The BCC believes the Government's "tough" fiscal programme aimed at stabilising the public finances will strengthen the UK economy in the longer term.