The British Chambers of Commerce (BCC) has upgraded its UK GDP growth forecast for the next two years, from 2.6% to 2.7% in 2015, and 2.4% to 2.6% in 2016, due to stronger than expected growth in household consumption and services. The latest forecast also makes the BCC’s first prediction for UK growth in 2017 - at 2.6%.
While welcoming the upgrade, BCC Director General, John Longworth highlights that consumer spending is a key driver for the BCC’s expected growth figures. Longworth notes that consumption is a fickle friend of the economy - and that long-term, sustainable growth depends on boosting the contribution of business investment and exports. Longworth goes on to warn politicians that two key metrics matter for the next government: business investment figures and improvements to the UK’s current account.
ECONOMIC FORECAST – OVERVIEW
Commenting, John Longworth, Director General of the BCC said:
“We are upgrading our UK growth forecasts for 2015 and 2016 because businesses up and down the country are doing well - despite international and domestic uncertainty.
“While 2015 has got off to a good start, there is no room for complacency. The UK is still a long way from achieving the great, sustainable, long-term growth we want to see. Consumer spending is one of the key drivers in our growth upgrade. While there’s nothing wrong with consumer confidence, a balanced economy that will provide growth and jobs in the long-term, needs a much bigger contribution from business investment and exports. This year’s slowdown in business investment is a clear warning sign that politicians must do everything they can to create a stable and positive investment environment, and ensure businesses can get access to the finance they need.
"Whilst UK exports made welcome progress at the end of 2014, imports are still increasing at a faster rate - and our growing current account deficit remains a huge challenge. With an unsustainable, negative balance, we have a way to go to reach the government’s 2020 export targets, and to restore our current account to health.
“UK firms also face considerable uncertainty – including global tensions, the stagnating Eurozone and the most wide open UK general election in decades. As we edge closer to the general election, businesses must keep focused on the fundamental strengths of our economy and Britain as a place to do business. By the same token, politicians need also to focus on the fundamentals, not on short-term vote winners, if we are to have guaranteed prosperity in the years to come.
“The next government must be measured on whether it helps to boost business investment and supports improvements in the current account. Rebalancing of this sort is a prerequisite to achieving long-term, great, sustainable growth. Notwithstanding these challenges, our upgrade is great news for business and for Britain over the next few years"
David Kern, Chief Economist at the BCC, said:
“Our UK growth forecasts for the coming years have been upgraded, despite the lower than expected result for 2014. Lower oil, food and other commodity prices are pushing up short-term growth and are a key factor in upgrading our growth forecast, regardless of the negative impacts. The prospect that interest rates will remain low for longer than previously predicted adds further backing to our predictions for stronger growth over the next three years.
“UK growth in the next three years, though lower than in the US, will be stronger than in the Eurozone, including in Germany and France. But our recovery is still facing risks, global as well as domestic. Globally, the Eurozone outlook is still precarious, while geopolitical tensions in Ukraine and in the Middle East may affect growth adversely. Domestically, productivity is still too weak and the budget and external deficits are much too big. There are also concerns over prolonged uncertainties in the event of an inconclusive General Election.
“Despite stronger economic growth, it is concerning that the real trade deficit widened in 2014. In addition the UK’s current account deficit swelled to an unsustainable high level – due to a worse income balance. The big income deficit makes the need for a stronger trade balance even more critical. Greater efforts are needed to rebalance our economy, away from growth that is dependent on consumer spending, towards long-term growth that is based on business investment and exports.”
OTHER ELEMENTS FROM WITHIN THE FORECAST
Main components of demand
Main sectors of the economy
Official interest rates
Unemployment and productivity
Notes to editors:
John Longworth, Director General, and David Kern, Chief Economist, are available for interview.
A full copy of the forecast is available from the BCC press office.
Nick White – Press Officer
020 7654 5813 / 07825746812
Natasha Downes – Press Officer
020 7654 5817 / 07768458077
The British Chambers of Commerce (BCC) sits at the heart of a powerful network of 52 Accredited Chambers of Commerce across the UK, representing thousands of businesses of all sizes and within all sectors. For more information visit: www.britishchambers.org.uk