LONDON: The British Chamber of Commerce says the country's economy continues to be weak and its growth is slated to remain slow, though the fourth quarter of 2005 showed some indications of improvement.
The BCC, in its quarterly economic survey covering some 5,000 companies, found the manufacturing sector failing to sustain its recovery and facing threats, while the service sector remaining weak in spite of some improvements.
It said its quarterly net balance for domestic manufacturing sales rose to 13 in the fourth quarter of 2005 from a two-year low of 3 in the third quarter. The service sector recorded a balance of 18 in the fourth quarter from 13 in the third. This is clear indication that there is some momentum in the economic growth, which had remained 0.4 per cent in the third quarter.
BCC's economic adviser David Kern said on the basis of this finding, the economic growth could be around 0.5 per cent or a little above. "The worst is over, but the economy is still below trend," he said.
The BCC added that the modest improvements visible in the fourth quarter of 2005 follow marked deterioration in the previous quarters. There could be stability round the corner after the worsening trends in the earlier part of the year, but the weak balances across both the sectors point to acute risks. "Any UK recovery in 2006 is likely to be weak and below-trend," it added.
The lobbying organisation called for an interest rate cut so that the economy can be brought back on its tracks. It also wanted the government to initiate bolder steps to reduce red tape and assure the business that no additional tax increases are contemplated.
Companies from the manufacturing sector, which participated in the survey, said improvements in the fourth quarter came in domestic sales and orders, employment, cash flow and overall confidence levels. But, these gains were nullified by a decline in export sales and orders, despite a pick up in the country's biggest overseas market, that is, the euro zone. Employment expectations and overall investments too have fallen.
Service sector firms reported increases in home sales, export sales and orders, investments in plant and machinery and overall confidence. But, there were marked declines in home orders, employment and employment expectations.
The BCC has given a forecast of GDP growth for 2006 of 2.2 per cent, but it has given a rider saying this assumes that the country's quarterly growth improves. If the expected improvement does not take place, the average growth may fall below 2 per cent. BCC had revised its 2005 GDP estimate to 1.6 per cent from 2 per cent projected earlier.
The government expects a GDP growth of between 2 per cent and 2.5 per cent, as contained in chancellor of the exchequer Gordon Brown's pre-budget report. For 2005, Brown had brought down the projection from 2 per cent to 3.5 per cent to 1.75 per cent.
Posted
on : Fri, 20 Jan 2006 14:35 GMT | Business News
By : Rob Davis
|
