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British Chamber Of Commerce... Uk Relapse...

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BCC warns UK faces 'economic relapse'

Dan Atkinson, Financial Mail

6 September 2009, 1:10pm

A weak economic recovery marked by rising unemployment, spiralling Government borrowing and a heavy reliance on public expenditure is predicted today by the British Chambers of Commerce.

'The recession is ending, but the risks of a relapse are high,' said the BCC in its third-quarter economic forecast. This year's 4.3% plunge in gross domestic product (GDP) will be followed by growth of 1.1% next year and 1.9% in 2011, the report said.

But this would be bad news for the labour market - productivity gains mean that any annual growth rate of less than 2% will mean higher unemployment. Between 2003 and 2007, the average was 2.7%.

While the BCC expects export growth to outstrip growth in imports next year, it forecasts that by 2011 Britain will again import more than it sells abroad.

The forecast comes just days before Bank of England governor Mervyn King looks likely to be defeated by other members of the Monetary Policy Committee over plans to flood the economy with more money through the quantitative easing programme.

Defeated last month, when he proposed putting an additional £25bn into the economy to counter recession, analysts say King is unlikely to have changed his view that this remains necessary-but could be outvoted again.

The BCC says that while the growth in general Government spending is expected to moderate to 2% next year from 2.3% this year, it is expected to be running at 3% in 2011.

'The economy relies too much on Government spending and Britain's fiscal position is unsustainable in the medium term,' said David Kern, BCC chief economist.

'Public sector borrowing is forecast to total 12.5% of GDP in 2009-2010 and 2010-2011.' In 2007-2008, it was just 2.4%.

Kern warned: 'The UK's international credit rating will be under serious threat unless credible measures are taken.'

So... growth of 1.1% next year, below the 2% required to sustain employment levels, means rising unemployment in all of 2010 and then only moderately rising unemployment in 2011, with the "consumption culture" resuming.

Looks like a 2012 HPC bottom to me and then... watch out. We're entering the "last great hurrah!" of the West. Remember: by 2015, 1 unit of debt growth produces NO units of GDP growth, so we're either into a deflationary depression or a hyperinflationary blow-out.

Edited by AvidFan

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