Recession looms closer Economy ‘could hit recession within months’, warns BCC

The lobby group, which published its quarterly economic forecast today, urged the Monitary Policy Committee (MPC) to cut interest rates as soon as possible.

“The longer the MPC waits before cutting rates, the bigger the danger the situation will deteriorate,” said the BCC’s director general, David Frost.

The report also revealed unemployment is likely to increase by up to 300,000 over the next two or three years, peaking at almost 2 million.

“While a market slowdown in activity is likely over the next 18 months, even if interest rates are cut when inflation peaks, the correct policy decisions are still needed to ward off the threats of a serious and prolonged recession,” warned Frost.

David Kern, the organisation’s economic adviser, added that the British economy now faces a very real risk of recession. “Over the next two or three quarters, we expect growth to be slightly negative or zero,” he said.

“Thereafter, we expect a shallow recovery, but the period of weak, below-trend, growth is likely to be prolonged, lasting until the final months of 2009 or early in 2010.”

“Our view is that the threats to growth are more serious and more immediate than the risks of higher inflation. The UK economy urgently needs an interest rate cut to counter threats of recession,” he added.

© Crimson Business Ltd. 2008