Business

UK to avoid triple dip recession, says BCC

Media playback is unsupported on your device
Media captionJohn Longworth, director general of the BCC, says the weak pound is providing a boost for exporters

The UK is set to avoid falling back into recession, according to the British Chambers of Commerce (BCC).

The BCC believes a strong performance by Britain's service industries during the first three months of the year has kept the economy growing.

But a separate business survey suggests any recovery has not included the UK's manufacturers.

The Markit/CIPS manufacturing purchasing managers' index suggests the sector continued to shrink last month.

The index registered negative growth for the second month running, and output fell at its fastest rate since October.

The decline was blamed on tough market conditions, subdued confidence and bad weather.

"The onus is now on the far larger service sector to prevent the UK from slipping into a triple-dip recession," said Rob Dobson, senior economist at Markit.

Services strong

The BCC's survey, which included more than 7,000 firms, found that conditions for both the services and manufacturing sectors were improving, but the services sector saw some of the biggest improvements, with strong domestic sales and exports.

Services account for about three-quarters of the UK economy, while manufacturing makes up about a fifth of GDP.

BCC chief economist David Kern said the results of its survey suggested the economy had grown in the first three months of 2013.

He said this was contrary to the picture of the economy being painted by official figures.

"The survey reinforces our assessment that recent [official] gross domestic product figures have exaggerated the weakness of the UK economy and the volatility in output," he said.

"If an announcement of negative growth in the first quarter is misleadingly described as a triple-dip recession, confidence will again be damaged unnecessarily."

The Office for National Statistics (ONS) will give preliminary estimates of GDP growth for the first quarter later this month.

Its figures show the economy shrank by 0.3% in the last three months of 2012. An economy is considered to be in recession if it contracts for two consecutive quarters.

If the UK economy does contract in the first three months of the year, it will have fallen back into recession for the third time in five years.

Manufacturing exports down

The BCC says it expects the UK economy will record "positive but subdued growth" in 2013, but its director general John Longworth was keen to sound a note of caution.

He said the survey overall suggested a "long and tortuous road to recovery".

"These results provide a glimpse of the as-yet-distant sunlit uplands of recovery," he said.

"Businesses up and down the country are working hard to drive the economy, create jobs and export, but they cannot accelerate this process alone."

Manufacturers also said they needed help to ride out economic problems both at home and in key export markets in the eurozone.

Lee Hopley, chief economist at EEF, the manufacturers' organisation, said falling demand for UK exports was a particular concern.

"While manufacturers have made some good gains in non-EU markets over the past couple of years, the ongoing drag on orders from the eurozone is still significant and likely to impact on prospects over the coming months," she said.

Mixed signals over the future of the economy come ahead of the Bank of England's latest decision - due on Thursday - on whether to take more action to try to boost the economy.

Previous meetings of the bank's Monetary Policy Committee have seen members divided on whether to extend the current programme of quantitative easing.

Related Internet links

The BBC is not responsible for the content of external Internet sites