(SHARECAST) – Britain’s rate of growth in 2011 will be lower than previously expected due to the impact of the eurozone crisis and austerity measures, the British Chamber of Commerce predicts.
The UK economy is now expected to grow by 1.9 percent in 2011 compared to its previous forecast of 2.2 percent, published in September.
January’s VAT increase to 20 percent is predicted to slow growth sharply from 3% in the final three months of 2010 to 1.4 percent in the first half of 2010.
The BCC’s move follows a recent official downgrade by the Office for Budget Responsibility, which has cut its forecast for 2011 from 2.3 percent to 2.1 percent.
For 2012, however, the BCC raised its growth forecast from 1.8 percent to 2.1 percent due to the recent strength of the private sector and manufacturing in particular.
“British business is willing and able to drive the recovery, but it can only do so if the government will back its words with deeds,” BCC director general David Frost said, adding the government must address labour market regulations and the lack of access to finance to maintain the momentum of the current recovery.