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BCC claim slow Q1 growth

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10/04/2015
British businesses in both the manufacturing and services industry experienced a slowdown in the first quarter of this year, according to research released today by the British Chambers of Commerce (BCC).

Earlier this week, the CBI projected UK GDP growth of 0.7 per cent in Q1 – however, the BCC findings point instead to flagging sales and export fortunes, with the net balance of manufacturers reporting increased domestic orders down from 38 per cent in Q4 last year to 27 per cent in the most recent quarter. Services sector businesses reported a reduction from 33 per cent to 28 per cent in the same period. Investment intentions and hiring were also stagnant. Services slowdown particularly concerns the BCC, as the sector represents three-quarters of UK output.

“Our findings a reminder that the UK still faces obstacles on the path to sustainable, long-term growth,” comments John Longworth, BCC director general.

“Unless support for exports and business investment is placed at the heart of any future government, consumption and government spending will continue to drive an economic recovery that is unbalanced and unsustainable.”

“Our message to the politicians is simple; national interest must come before short-term political point scoring,” Longworth concludes. “Given that all parties agree that the UK needs to strengthen its trade performance, and that we need to encourage our businesses to invest more, these should be issues that unite – rather than divide – the parties over the weeks ahead.”

David Kern, BCC chief economist, said that UK recovery “remains unbalanced” with growth “still too reliant on consumer spending, and a current account deficit that is unsustainable.”

“While a healthy consumer sector is vital for the economy’s wellbeing, much greater efforts are needed to increase the contributions of exports and capital investment to Britain’s growth.”

The release of the BCC report follows news that the BoE Financial Policy Committee is extremely concerned about the UK current account deficit, which the Committee believes would result in markets deserting Britain in the event of an economic downturn.

“The weakness of mortgage demand, and zero inflation, will make it even more likely that the MPC will leave interest rates at current levels,” says Simon Wells, an HSBC economist. “If housing demand is slumping in an environment of falling mortgage rates, the MPC may worry about what would happen if rates rose.”

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