The government’s austerity measures will have a more serious impact on growth in 2011 than expected, claims the British Chambers of Commerce (BCC) as it downgrades its economic forecast for next year.
The BCC has revised down its forecast for GDP growth next year from 2.2 per cent to 1.9 per cent but tips a recovery in 2012, raising expectations from 1.8 per cent to 2.1 per cent. The revisions came before the widely anticipated decision by the Bank of England’s Monetary Policy Committee today to maintain the interest rate at 0.5 per cent.
According to a BCC statement, the change ‘reflects the assessment that the negative impact of the government’s austerity plan will initially be more serious than previously envisaged’. Lower house prices and other signs of ‘financial fragility’ in the UK household sector have been blamed for the downgrade. The worsening eurozone debt crisis will also dampen UK growth prospects next year more than previously expected, the statement says.