Economic Growth Prediction Downgraded
9:53pm UK, Sunday March 07, 2010
Business leaders have downgraded their predictions for UK economic growth this year.
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The British Chambers of Commerce (BCC) has called on the Government to scrap a 1% hike in National Insurance contributions and increase VAT instead.
The leading business group scrapped its 3% growth estimate and stated growth of 1% was more likely because of problems with medium-term recovery.
But, even though the group anticipates unemployment to rise, its latest report stated it will peak in the third quarter with a lower than expected 2.65 million people out of work.
Public sector borrowing will hit £163bn this financial year, £165bn in the next and ease to £147bn in 2011/12, it predicted.
Frost: Warning on recovery
BCC director general David Frost said: “The Government must use the forthcoming Budget as a platform for laying the foundations for a business-led recovery.
If it fails to do so, the recovery will take longer to gain momentum and may even slip into reverse.
“New business taxes must be avoided and unnecessary red tape suspended.
“The 1% hike in employer National Insurance contributions, planned for April 2011, should be abandoned immediately as it is a tax on jobs, which will cost firms £4.7 billion every year.
“Raising VAT by one percentage point, to 18.5%, will largely offset any lost revenue and it will be less damaging to business.
“The vital medium-term reduction in government debt and borrowing should entail curbing public spending in all areas except for key infrastructure expenditure, which will act to boost long-term growth and employment across the country.”
However, Britain’s position is no longer worse than many other European countries, according to BCC chief economist David Kern.
He stated after lagging behind in the second and third quarters of 2009 the UK’s growth in the fourth quarter was stronger than Germany’s and the eurozone as a whole.
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Submited at Monday, March 8th, 2010 at 12:00 am on Business by blum
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