British economy likely to be 'worse than expected' in 2009

British businesses need to prepare themselves for a worse than expected 2009 as a "very sharp deceleration in consumer spending" and a worsening external deficit put the squeeze on corporate Britain.

According to the British Chamber of Commerce's quarterly economic forecast, pros-pects for next year have worsened over the past few months, and while recession can still be avoided, the marked slowdown in growth will be enough to put many businesses under substantial pressure.

The BCC predicts that GDP growth will remain below trend until the end of 2009, coming in at 1.7 per cent in 2008 and just 1.6 per cent the following year. In February, the BCC had predicted a recovery to 2 per cent in 2009, but the business group now expects conditions to deteriorate.

David Kern, the economic adviser to the BCC, said: "British businesses are facing two difficult years. The Monetary Policy Committee and the Government must adopt pro-active policy measures aimed at countering the threats to growth."

With public finances very stretched, the BCC believes that there is now a clear risk that the Government will breach its fiscal rules over the next two or three years.

"While breaching the fiscal rules would undermine credibility and confidence, such a breach would nevertheless be justified if it helps to alleviate a very severe economic downturn," said Mr Kern.

"At the very least, the automatic stabilisers, which increase the size of the budget deficit when the economy slows, must be allowed to do their job and mitigate the downturn. But, once the economy recovers, the Government must take more determined measures to strengthen the UK's medium-term budgetary position."

Meanwhile, the CBI will reveal today that small- and medium-sized manufacturers have been raising their prices over the past few months, to try to tackle what has been the strongest pressure on costs in more than 20 years.

The CBI survey said that as well as rising costs, manufacturers have also had to deal with slowing demand. Russel Griggs, the chairman of the CBI's SME council, said: "Small and medium-sized manufacturers are continuing to feel the impact of higher fuel and raw material costs, and they are now having to pass these on to customers.

"While the drop in export orders is worrying, particularly for medium-sized firms, there are some more encouraging signs: smaller firms have been quite bullish about taking on extra staff, and some growth in output is forecast for the months to July."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Guru Careers: Pricing Analyst

£30 - 35k (DOE): Guru Careers: We are seeking a Pricing Analyst with experienc...

Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

£24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Sales Team Leader - Wakefield, West Yorkshire

£21000 - £24000 per annum: Ashdown Group: The Ashdown Group has been engaged b...

Day In a Page

Revealed: Why Mohammed Emwazi chose the 'safe option' of fighting for Isis, rather than following his friends to al-Shabaab in Somalia

Why Mohammed Emwazi chose Isis

His friends were betrayed and killed by al-Shabaab
'The solution can never be to impassively watch on while desperate people drown'
An open letter to David Cameron: Building fortress Europe has had deadly results

Open letter to David Cameron

Building the walls of fortress Europe has had deadly results
Tory candidates' tweets not as 'spontaneous' as they seem - you don't say!

You don't say!

Tory candidates' election tweets not as 'spontaneous' as they appear
Mubi: Netflix for people who want to stop just watching trash

So what is Mubi?

Netflix for people who want to stop just watching trash all the time
The impossible job: how to follow Kevin Spacey?

The hardest job in theatre?

How to follow Kevin Spacey
Armenian genocide: To continue to deny the truth of this mass human cruelty is close to a criminal lie

Armenian genocide and the 'good Turks'

To continue to deny the truth of this mass human cruelty is close to a criminal lie
Lou Reed: The truth about the singer's upbringing beyond the biographers' and memoirists' myths

'Lou needed care, but what he got was ECT'

The truth about the singer's upbringing beyond
Migrant boat disaster: This human tragedy has been brewing for four years and EU states can't say they were not warned

This human tragedy has been brewing for years

EU states can't say they were not warned
Women's sportswear: From tackling a marathon to a jog in the park, the right kit can help

Women's sportswear

From tackling a marathon to a jog in the park, the right kit can help
Hillary Clinton's outfits will be as important as her policies in her presidential bid

Clinton's clothes

Like it or not, her outfits will be as important as her policies
NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders