British business group cuts growth forecasts
A leading British business group on Monday cut its growth forecasts for the country's economy over the next two years but insisted the government's austerity measures were correct.
The British Chambers of Commerce (BCC) said it expects the economy will grow by 1.3 percent this year against a previous forecast of 1.4 percent, and cut its forecast to 2.2 percent for 2012 down from 2.3 percent.
A major reason for the downgrade is high inflation which is putting a squeeze on household incomes, said the group in its quarterly economic forecast.
Inflation is currently at 4.5 percent, more than double the official target of two percent.
"This forecast suggests that the economy is still facing difficult challenges in the years ahead," said BCC director general David Frost.
"Although growth will be slow, the government is right to persevere with its plans to cut the deficit."
He added that the austerity measures introduced by the Conservative-Liberal Democrat coalition government, aimed at slashing a record public deficit, needed to be balanced with business-friendly policies.
"The government has more to do if the private sector is to create new jobs, invest and export and contribute to a lasting economic recovery in the UK," he said.
The opposition Labour party has attacked the government's austerity plans, claiming they risk knocking Britain's recovery from a deep recession off course.
A finance ministry spokesman said: "The government welcomes the BCC's continued support for the deficit reduction plan."
© 2011 AFP