BCC: UK growth too reliant on consumer debt

The British Chambers of Commerce (BCC) has downgraded its UK gross domestic product (GDP) growth forecast for the year to 2.4 per cent, from a previous prediction of 2.6 per cent

The leading trade body blamed a weaker-than-expected trade and manufacturing performance.

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

BCC director general John Longworth said: “It looks like manufacturing is heading into terminal decline.”

“Our persistently weak trade performance and current account balance are impacting our overall growth.”

Consumer spending and the services sector have spearheaded a recovery in Britain which saw its economy outperform those of other advanced nations last year.

Britain’s economy is poised to head the pack once again this year, but policymakers want to see more balanced growth also reliant on strong manufacturing activity and greater exports.

Mr Longworth warned there was “still a long way to go” before the UK recovery was complete and said the UK could not “rely so heavily on consumer spending to fuel our economy”.

“Consumer spending and debt are still the drivers of the economy”, he added. “Without a rebalancing we remain in a cycle of boom and bust, though I don’t think the government has a real strategy for rebalancing the economy.”

In an interview with the BBC he 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”.

The BCC expects interest rates – which have now been at 0.5 per cent 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.”