"GDP growth in Q4 2005 was confirmed at 0.6% quarter-on-quarter. Although year-on-year Q4 growth was revised up marginally, to 1.8%, the upturn in GDP growth is not firmly based. The new figures highlight the acute weakness of business investment and the dismal performance of manufacturing. Household consumption growth in Q4 was 0.7% quarter-on-quarter, but was only 1.7% year-on-year. The negative growth in investment was the most disappointing and worrying feature in today's figures. Total investment fell 0.8% quarter-on-quarter in Q4, while business investment recorded an even larger quarterly fall of 1.0%. Indeed, manufacturing investment fell by a huge 7.2% in Q4. The new figures support the BCC's recent forecast that UK GDP growth is likely to average only some 2.2% in 2006, and is set to remain below trend in year-on-year terms."
David Kern concluded: "The figures published today highlight the threats facing UK businesses. We do not share the optimistic assessment of future UK growth prospects signalled by recent official forecasts. We continue to believe that powerful factors support the case for a modest interest rate cut -unemployment is rising, year-on-year GDP growth is set to remain well below trend, wage rises are modest, CPI inflation has slowed more quickly than expected, business investment has fallen, and confidence remains weak. But lower interest rates, on their own, will not restore business confidence. It is vitally important that the Chancellor uses next month's Budget as a platform for signalling stronger support for business, and for making it clear that he will not contemplate higher taxes on business. Without such reassurance, confidence will weaken further, and the economic outlook will worsen."