British economic recovery predicted to slow in 2011

British economic recovery predicted to slow in 2011 The UK economy will grow by less than expected next year, but growth in 2012 will prove better than predicted, according to the British Chambers of Commerce (BCC). The employers' association downgraded its forecast for the UK's GDP in 2011 from the 2.2pc it predicted in September to 1.9pc. The BCC blamed the eurozone debt crisis, austerity cuts, the weak housing market and the VAT increase from 17.5pc to 20pc.

The office for Budget Responsibility recently downgraded its 2011 growth forecast from 2.3pc to 2.1pc. The BCC was a lot more cautious, suggesting year-on-year growth will slow from 3pc in the final quarter of 2010 to 1.4pc in the second half of next year.

But it believes the UK economy is sufficiently robust to avoid a new recession, and is optimistic that the policies aimed at rebalancing the economy towards the private sector will improve Britain's medium-term prospects.

The Bank of England's Monetary Policy Committee meets on Wednesday and Thursday of this week to discuss UK interest rates and the BCC believes they will be kept on hold at 0.5pc for the 21st consecutive month.

David Kern, BCC's chief economist, said: 'The Bank of England cannot ignore the risk that if inflation remains around 3pc, expectations could worsen. 'However, the MPC would be wrong to overreact. We therefore expect the current 0.5pc level to be held at least until Q3 2011.

'Given the risks of a setback to growth in the first two to three quarters of 2011, we expect the MPC to increase the Quantitative easing programme from £200bn to £250bn before the middle of next year.'

The Bank of England has kept the door open to further Quantitative easing in case growth falters markedly over the coming months as the fiscal tightening increasingly takes its toll. For the latest updates PRESS CTR + D or visit Stock Market news Today

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