8th July 2008
The UK is at serious risk of a recession, the British Chambers of Commerce (BCC) has warned.
The BCC's Quarterly Economic Survey, which polled the opinion of nearly 5,000 UK firms, reveals that business confidence in key economic conditions fell markedly in the second quarter of 2008.
Businesses' confidence in their profitability dropped to particularly worrying levels. In the manufacturing sector, profitability confidence plunged to its lowest level in almost 10 years, while in the service sector, the same measure dropped to a low last recorded at the end of 1990.
The survey reveals a stark weakening of confidence in vital indicators, including those for sales and orders. An improvement in export balances is the only positive news of note.
The BCC fears that its results "signal a menacing deterioration in UK prospects". BCC economic adviser David Kern said: "We are now facing serious risks of recession."
"For the first time in many years, the vital results for domestic sales and orders, and for cashflow, have moved into negative territory for both manufacturing and services. The outlook is grim, and we believe that the correction period is likely to be longer and nastier than anticipated."
Kern said that the Bank of England faced difficult choices in its interest rate decision, due on Thursday, but that the "immediate threats to growth are more alarming than dangers of higher inflation".
"An increase in rates at the present time would weaken further the banking sector, and would endanger the smooth flow of finance to business," he added.
Recession 'looming', firms warn
The BCC's Quarterly Economic Survey, which polled the opinion of nearly 5,000 UK firms, reveals that business confidence in key economic conditions fell markedly in the second quarter of 2008.
Businesses' confidence in their profitability dropped to particularly worrying levels. In the manufacturing sector, profitability confidence plunged to its lowest level in almost 10 years, while in the service sector, the same measure dropped to a low last recorded at the end of 1990.
The survey reveals a stark weakening of confidence in vital indicators, including those for sales and orders. An improvement in export balances is the only positive news of note.
The BCC fears that its results "signal a menacing deterioration in UK prospects". BCC economic adviser David Kern said: "We are now facing serious risks of recession."
"For the first time in many years, the vital results for domestic sales and orders, and for cashflow, have moved into negative territory for both manufacturing and services. The outlook is grim, and we believe that the correction period is likely to be longer and nastier than anticipated."
Kern said that the Bank of England faced difficult choices in its interest rate decision, due on Thursday, but that the "immediate threats to growth are more alarming than dangers of higher inflation".
"An increase in rates at the present time would weaken further the banking sector, and would endanger the smooth flow of finance to business," he added.
Tags: Employment, Regulations
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