The British economy is heading ever closer towards recession, with a new UK business survey revealing a sharp slowdown in manufacturing and service levels.
According to the British Chambers of Commerce’s Q2 economic study, key service sector balances are at the lowest point since the early nineties recession.
The survey of nearly 5,000 firms revealed the dual impact of the credit crunch and rising costs are sending business cash flows to record low levels.
Should the trends continue, the British Chambers of Commerce warns the UK business sector is just three months away from “technical recession”.
Key areas at early 1990’s levels include home sales and orders and employment expectations, as well as manufacturing and service sector confidence.
The study backs up the Government's May manufacturing production figures released yesterday, which showed a 0.5% fall from the April level and 0.8% decline on the corresponding period last year.
British Chambers of Commerce economic adviser David Kern says the UK’s “correction period” is likely to be longer and nastier than anticipated.
“The outlook is grim. The Q2 results signal a menacing deterioration in UK prospects,” he says.
“A major recession can still be avoided, but forceful measures are needed to improve confidence. The MPC must resist misguided calls for higher interest rates.
“Indeed, if wage pressures remain muted, the option of early interest rate cuts must be considered.”
British Chambers of Commerce director general David Frost has warned the Government against any measures which could hit UK business confidence.
“The temptation for the Government will be to raise business taxes in the next PBR because the exchequer is running out of money. This would be a catastrophe,” he says.
“I am sending Alistair Darling and Gordon Brown a strong message from the businesses I meet every day up and down the country: to put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on – confidence.”IFAonline
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