The British Chambers of Commerce on Tuesday downgraded U.K. growth forecasts for 2013 and 2014, citing public spending cuts and slow global growth, but upgraded the outlook for this year, which was the first upward revision since March 2011.
The business lobby urged the Chancellor to introduce the bold measures required to support growth, job creation, exports, investment, and business confidence. Chancellor George Osborne is set to present the Autumn Statement on Wednesday.
In its latest economic forecast, the BCC downgraded the growth forecast for 2013 to 1 percent from 1.2 percent, and the 2014 estimate to 1.8 percent from 2.2 percent.
Reduced global growth prospects, and the possibility of more reductions in current spending will slow the pace of U.K. recovery over next two years, the group said.
For 2012, the BCC projects 0.1 percent contraction, which is better than the 0.4 percent fall previously estimated in September.
Yesterday, manufacturers' organization EEF said GDP will grow 1.2 percent next year, following a 0.1 percent fall in 2012.
On the labor market front, the BCC projected U.K. unemployment to peak near 2.65 million or 8.1 percent of the workforce in the fourth quarter of 2013, up from 2.514 million or 7.8 percent in the third quarter of 2012.
Nonetheless, the group still expects a moderate rise in the jobless total, due to planned public spending cuts and low economic growth.
Public sector borrowing for 2012/13 was estimated at GBP 104.1 billion, around GBP 12 billion higher than the Office for Budget Responsibility forecast published in March.
"As we wait in anticipation for the Chancellor to deliver his Autumn Statement tomorrow, our new forecast highlights the challenges still facing the UK economy over the months and years ahead," said John Longworth, Director General of the BCC.
In full-year terms, annual CPI inflation is seen at 2.9 percent in 2012, before slowing to 2.5 percent in 2013, and 2.2 percent in 2014. The new inflation forecasts are higher than in September for 2012 and 2013, and are unchanged for 2014.
The BCC sees official interest rates to remain at 0.5 percent until early 2014 and then to rise modestly to 0.75 percent in the second quarter of 2014. Also, it does not predict further increases in quantitative easing in the near-term.
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