Worsening economic prospects predicted for next year

Businesses have been warned that trading conditions in 2009 may be tougher than expected.

According to the British Chambers of Commerce (BCC), next year will see a sharper deceleration in consumer spending than had been previously predicted.

The BCC’s Quarterly Economic Forecast said that the outlook for 2009 had deteriorated over the past few months.

GDP growth is expected to remain below trend for the next eighteen months, the BCC said, managing only 1.7 per cent this year and slipping to 1.6 per cent in 2009.

Three months ago the BCC had been forecasting a growth rate of 2 per cent for next year.

Although the BCC said it believed that a recession was still unlikely, businesses should prepare themselves for a difficult and risky period.

The BCC urged the Bank of England to act proactively to counter the threat to growth and the government to provide more support for smaller businesses.

David Kern, economic adviser to the BCC, said: “UK businesses will face a difficult and risky climate over the next year.”

He added: “The immediate policy priority is to limit the risk of a major economic downturn. It is vital to ensure that the smooth flow of credit to UK businesses is not damaged by acute problems in the mortgage market and in the financial sector. Small businesses are particularly vulnerable when the banking sector is under pressure, and the Government may have to take special measures to support them if the credit crunch worsens.”

Date:12 May 2008