Business

UK growth forecast cut by British Chambers of Commerce

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The British Chambers of Commerce has cut its UK economic growth forecasts, blaming a weaker-than-expected trade and manufacturing performance.

The business lobby group has cut its growth forecast for this year to 2.4% from 2.6%.

In addition, it has has lowered its forecast for both 2016 and 2017 to 2.5% from 2.7%.

It said the manufacturing sector, which it expects to contract this year, had been hit by "falling global prospects".

"Our persistently weak trade performance and current account balance are impacting our overall growth," the BCC's director general John Longworth said.

Slowing growth in the third quarter contributed to the downgrade, the BCC said.

In November, official figures showed the UK grew by 0.5% between July and September, marking a slowdown from the 0.7% rate in the second quarter.

Debt warning

Mr Longworth warned there was "still a long way to go" before the UK recovery was complete.

The BCC also cut its growth forecast for the dominant services sector - which accounts for more than 70% of GDP - and said the UK could not "rely so heavily on consumer spending to fuel our economy".

Speaking to the BBC, Mr Longworth said growth in the UK was being fuelled by debt, which was behind rising consumer spending and asset prices, in particular housing.

"If it's based on debt you then lead to a boom-and-bust cycle again," he told BBC Radio 5 live's Wake Up To Money programme.

Mr Longworth noted that in the last parliament the government said it would rebalance the economy towards manufacturing and exports. But he said efforts to encourage export growth had been "a complete failure".

It expects interest rates - which have now been at 0.5% for more than six years - to rise again in the third quarter of next year.

But Mr Longworth warned: "We have been down this path before, and know that it leaves individuals and businesses exposed when interest rates do eventually rise."

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