BCC cuts growth forecast for the UK economy

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The British Chambers of Commerce has cut its growth forecast for the UK economy, blaming rising inflation and a squeeze on household incomes.

It now expects expansion of 1.3% this year, compared with its previous estimate of 1.4%, with growth of 2.2% predicted in 2012, down from 2.3%.

The official forecast from the Office of Budget Responsibility is for growth of 1.7% this year.

Inflation currently stands at 4.5%, more than double the 2% target.

Falling unemployment

Despite cutting its economic growth forecast, the BCC said the government was right to continue with its efforts to trim the UK's budget deficit by cutting public spending.

BCC director-general David Frost said he expected economic growth to gather momentum at the end of this year, strengthening to 2013, led by higher exports and business investment.

Regarding unemployment, the BCC expects it to fall very slightly, from 2.65 million to 2.6 million by mid-2012.

The most recent official figures from the Office for National Statistics showed that the UK economy grew 0.5% in the first quarter of 2011.

A Treasury spokesman stressed that the economy was continuing to create jobs, with UK unemployment falling in the three months to March, the second quarterly drop in a row.

He added: "The government welcomes the BCC's continued support for the deficit reduction plan."

However, shadow Treasury minister Chris Leslie said the BCC's figures showed that the government was cutting spending too quickly.

He said: "The British Chambers of Commerce are just the latest major organisation to downgrade their forecasts for economic growth in the UK, and continue to predict a rise in unemployment as deep cuts and tax rises start to kick in.

"Slow growth and more people out of work and on benefits will make it harder to get the deficit down."

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