BCC voices concern over economic recovery

The UK economy expanded further in the second quarter, but "serious" concerns pose a threat to a sustained recovery, the British Chambers of Commerce (BCC) warned today.

The BCC is predicting growth of between 0.6% and 0.7% in the three months to the end of June as its latest quarterly survey suggested the recovery gained traction.

However, it cautioned over sluggish growth in the services sector and the pressure to hike prices as manufacturers battle against rising input costs.

The BCC's report follows a worse-than-expected service sector survey yesterday from the Chartered Institute of Purchasing and Supply (CIPS), which suggested the rate of growth slowed to its weakest for nearly a year in June.

A recent CIPS manufacturing survey also sparked fears as it indicated the export market - a key driver of the bounce back so far - had run out of steam.

The BCC said underlying weaknesses in the economy remain, "which cannot be ignored if we are to avoid a relapse into recession".

However, it is sticking by predictions for growth of up to 0.7% both in the second and third quarter before stalling as austerity measures take effect.

Its survey shows firms enjoyed the biggest rise in manufacturing home sales since the second quarter of 2007 during the three months to June 30, while the result for export sales was the best since the third quarter of 2006.

Employment conditions improved markedly, although confidence levels among service sector firms weakened in a "disappointing setback" at this stage of the recovery, said the BCC.

It also believes unemployment is yet to reach its peak, predicting up to 2.65 million jobless.

David Frost, director general of the BCC, said: "With very austere times ahead, no one should kid themselves into thinking that the UK's economic recovery is totally secure.

"There will need to be an unwavering focus on ensuring business is able to deliver growth, create jobs, and drive a lasting recovery."