Gdp Revision Shows Need For A Long-term Strategy For Growth
24 May 2012 in Chamber News
• UK GDP for Q1 2012: -0.3% on the quarter, -0.1% on the year
Commenting on the revised GDP figure published today by the ONS, John Longworth, Director General of the British Chambers of Commerce (BCC), said:
“The revised GDP figure of -0.3% for the first quarter of the year underlines the need for the government to implement a bold, long-term strategy for growth. Over the past quarter, business surveys have shown that companies are more optimistic than many of the economic indicators suggest. Many of our members tell us they don’t identify with such pessimistic statistics and are cautiously optimistic. “Deficit reduction is crucial to our economy, but there are measures that the government can take to free up business to grow. Firms need to see real deregulation, improved access to finance through the creation of a state-backed business bank, robust infrastructure like transport and energy networks, and ways to help them take on more staff. Reforms to planning rules promised in Westminster must make it out to the real world so businesses can expand.
“Now is not the time for short-term politics. Now is the time for a bold, enterprise-friendly government to enable business to grow in the long-term, and squeeze every drop of potential growth from companies across the country. Without this, the economy will continue to bump along the bottom rather than returning to growth.
“Businesses don’t need hand outs; they need a government that will facilitate growth and address market failures where they exist, for example in access to finance. If the government wants businesses to invest and grow at a time of global uncertainty, it needs to generate stability and a better business environment at home by setting business free.”
David Kern, Chief Economist at the British Chambers of Commerce said:
“The revision of GDP from -0.2% to -0.3% is disappointing but hasn’t come as a huge surprise. The fall in output from the erratic construction sector was even bigger than originally thought, and this is acting as a drag on growth. Consumer spending rose slightly but total capital investment fell, with an increase in business investment and a drop in government investment. The figures also show that imports increased more than exports. However, fundamental doubts about the accuracy of the ONS’s estimates persist. Virtually every business survey has indicated positive growth in the economy in the first quarter. Furthermore, the ONS’s own labour market figures have shown an increase in employment and a 0.9% increase in the actual number of hours worked, which makes a quarterly fall in GDP difficult to comprehend. It is possible that the GDP estimate will be revised upwards later in the year.
“The main priority is to minimise any damage to business confidence at a time when the eurozone crisis continues to put the UK economy at risk. Regardless of views surrounding the ONS estimate, it is clear that economic growth remains much too low and priorities within the government’s spending envelope should be reallocated. That means more infrastructure spending, cutting red tape and encouraging businesses to boost exports and job creation. While the deficit reduction plan must remain on course, forceful measures are needed to increase the flow of lending to credit-worthy businesses so the private sector can drive recovery.”