BCC: Economy faces 'relapse' risk

The British Chambers of Commerce (BCC) has issued a warning that there is a “high” risk that the economy could relapse into recession and that below-average growth is likely for the next two years.

In the business group’s latest economic forecast, released on Sunday, it said the economic outlook in the UK “will remain highly uncertain for a considerable time”.

“The recovery will be fragile, and the risks of a relapse are high,” it added.

The UK emerged from recession in the fourth quarter of last year with 0.3% growth. The BCC predicted that the economy will grow 1% this year and 2.1% in 2011, the latter figure downgraded from its previous prediction of 2.3% growth.

In the report, BCC director general David Frost  said: "The recession may have technically ended, but there is no room for complacency.

"For the recovery to be sustained, it is crucial that all the political parties recognise the vital role of wealth-creating businesses in driving economic growth and job creation.

"The government must use the forthcoming budget as a platform for laying the foundations for a business-led recovery." The government’s annual budget is expected later this month.

The BCC is one of a number of business groups calling on the government to scrap the planned 1% rise in employer National Insurance contributions, which is due to come into force in April next year.

The group said the move amounted to a "tax on jobs" and would cost businesses £4.7bn a year, suggesting a 1% rise in VAT to 18.5% as an alternative that could "largely offset" any lost revenue.

© Crimson Business Ltd. 2010