Rise in confidence signals potential start of recovery
Rise in confidence signals potential start of recovery
Tuesday 7th July 2009
Financial analysts have suggested the worst of the UK recession has now passed, but warn there will be no sharp recovery.Economists currently disagree over the shape of the recession and recovery, with predictions including V-shaped, W-shaped, and tick-shaped recoveries.
The British Chambers of Commerce (BCC) quarterly economic survey of 5,600 companies points to the economy dropping off suddenly if there is no more initiatives from the government limiting the impact of recession, and leading to a W-shaped recession.
In the second quarter of the 2009 survey, firms reported greater confidence in turnover and employment expectations in both manufacturing and service sectors saw gains.
However, the BCC still expects unemployment to hit 3.2 million in mid-2010 and it warns it is "far too early" to say that recovery is secure.
David Kern, BCC chief economist, said: "The pace of decline in the UK economy is clearly moderating.
"The worst phase of the recession is over, but serious downward pressures persist across all sectors and regions."
He added Britain's international credit rating needed to be maintained through improving public finances.
"To avoid undue damage to our productive base, painful cuts to spending programmes must be the main tool for repairing our public finances," Mr Kern said.
The BCC is calling for the planned increase in National Insurance contributions to be abandoned immediately.
Simon Hayes, chief UK economist at Barclays Capital, issued an economic outlook for the UK yesterday.
He stated while the worst of the recession was probably behind us, tight credit supply and severe fiscal tightening in prospect, "outright optimism seems premature, and the economy looks set for a prolonged period of lacklustre growth".
He went on to predict a contract in the economy of -4.2 per cent in 2009, and growth of 1.3 per cent and 2.2 per cent in 2010 and 2011 respectively.
"The economic devastation wrought in the first quarter is hard to overstate. GDP fell by 2.4 per cent quarter on quarter, the largest fall for more than 50 years," Mr Hayes stated.
"The drop was almost as large as the total peak-to-trough decline in the 1990s recession, which was spread over five quarters."
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