BCC ups forecast for UK economic growth

Despite concerns of growing skills shortages the UK economy is now expected to grow faster than previously expected, according to a recent report from the British Chambers of Commerce.

Shopper holding UK currency
Projections of economic growth were upgraded by the British Chambers of Commerce (BCC), although the organisations warned of growing problems over skills shortages and of the need for the government to agree a new, post-Brexit immigration policy.

BCC backs increased GDP growth

The BCC raised its forecast for GDP growth from 1.1 per cent to 1.4 per cent in 2018; from 1.3 to 1.5 per cent next year; and predicted 1.6 per cent in its first forecast for 2020.Larger than expected growth, said the organisation, was largely being driven by stronger than expected levels of consumer spending and “robust” exports, particularly to key markets such as the eurozone and US.“That said,” added the BCC, “with imports also likely to continue to grow at a good rate, the contribution of net trade to UK GDP growth over the near term is to be limited, particularly with little evidence of a sterling boost to the UK’s overall net trade position.“Despite the upgrades, UK GDP growth is set to remain well below the historical average throughout the forecast period. Our latest forecast also implies that the UK will remain among the worst performing economies in the G7 until 2020 at the earliest.“Productivity is expected to improve marginally over the forecast period but will remain subdued, hampered by deep rooted problems in the economy, including skills shortages and chronic underinvestment in the UK’s infrastructure.”
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UK inflation reaches a peak

The report said that inflation now appeared to have peaked and will begin easing back in the near term, while average earnings were now expected to grow by slightly more than previously expected.Adam Marshall, BCC director-general, commented, “While many individual businesses are doing well, the inescapable conclusion from our forecast is that the UK economy as a whole should be performing better than it is, given robust and sustained global growth.“Although strong global conditions have given the UK a bit of a boost through higher export demand in recent months, we have serious concerns about the potential for further growth here at home when the performance of key trading partners slows. Sustained skills and labour shortages are also a real issue, with businesses reporting significant difficulties recruiting and retaining the people they need.“Political uncertainty aside, the biggest brake on higher UK growth is a lack of concerted action to ‘fix the fundamentals’ here at home, with government attention distracted by Brexit.“A concerted effort to get the basics right on connectivity, infrastructure, training, immigration, procurement and business costs would give rise to a wave of investment and significant productivity improvements.“The power to kick-start the UK economy and raise the trend rate of growth above the current sluggish levels, lies in Westminster, not in Brussels – and businesses will respond to action by delivering investment, higher productivity, and the increased wages we all want to see.” 
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