Slowdown will push rates lower, chambers predict

BRITISH BUSINESSES face "serious" threats this year that will force the Bank of England to eventually cut interest rates, the British Chambers of Commerce said yesterday.

The economy will slow this year - in the UK and globally, the employers' organisation said in its quarterly forecast.

"The UK economy is set to decelerate markedly," said David Kern, an economic adviser to the BCC, who forecasts GDP falling from last year's 3.1 per cent to 2.5 per cent this year and 2.3 per cent in 2006. "Consequently, the business climate will become riskier and more difficult over the next 12 to 18 months," he said.

Its report contrasted with Tony Blair's comments as he unveiled Labour's pledges to the electorate. A third-term Labour government would continue with the policies that have delivered economic prosperity. "We'll make sure that the British people get the economy that we need and also that we equip them for that economy in the 21st century," Mr Blair said.

The BCC forecast showed that the slowdown would be driven mainly by lower growth in household consumption, as the cooling housing market and the increased personal debt burden dampen personal spending. "Investment and exports, while stronger than in our previous forecast, are most unlikely to fill up the slack created by weaker growth in consumer spending," Mr Kern said. "The outlook for UK interest rates is uncertain ... but raising rates would be unnecessary and potentially harmful." He added: "We believe the base rate has peaked at 4.75 per cent and our central forecast envisages no change in the next five to eight months, followed by a cut to 4.50 per cent at the end of 2005."

The BCC added its voice to the chorus of warnings from independent think- tanks that Gordon Brown will break his "golden rule" on the public finances without another tax rise.

Mr Brown has committed himself to borrowing only to invest when averaged over the economic cycle, meaning he cannot end up in the red on day-to- day spending. The Treasury has consistently said it will meet its fiscal rules.

Start your day with The Independent, sign up for daily news emails
News
The two faces revealed by the ultraviolet light
newsScholars left shaken after shining ultraviolet light on 500-year-old Welsh manuscript
News
Rosamund Pike played Bond girld Miranda Frost, who died in Die Another Day (PA)
news
Arts and Entertainment
books
News
newsHow do you get your party leader to embrace a message and then stick to it? With people like this
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: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Loren Hughes: Financial Accountant

£45,000 - £55,000: Loren Hughes: Are you looking for a new opportunity that wi...

Sheridan Maine: Finance Analyst

Circa £45,000-£50,000 + benefits: Sheridan Maine: Are you a newly qualified ac...

Day In a Page

General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat