Gains in Q2 but recovery is still on Bambi legs

Friday, July 09, 2010 | Posted by: Fiona Cullinan
Categories: Economy, Financing | Tags: recession, economy, property, survey, data, manufacturing, construction, British Chambers of Commerce, sector, service, interest rates, export sales, BCC, interet rat

The British Chambers of Commerce’s latest Quarterly Economic Survey out this week (6 July 2010) saw the UK economy managing to keep out of recession in Q2 and build on the growth kickstarted in Q1. But, while predicting further growth, it seems the BCC is also seriously concerned about a relapse.

The survey of 5,600 businesses across all UK regions notes underlying weaknesses in the economy, which cannot be ignored if recovery is to be sustained.

David Kern, chief economist at the BCC, said:

“Despite an improvement in manufacturing, the sector still faces serious risks. Given the sector’s poor long-term historical record, it is much too early to conclude that we are now seeing a sustainable manufacturing upturn.

“The service sector, which accounts for the bulk of GDP in the UK, is not recovering at an adequate pace and this heightens the threat of an economic setback.

“This quarter’s poor cash flow data, in both manufacturing and services, indicates that many businesses are still facing serious financial difficulties. Investment and confidence levels remain disappointing across all sectors.”

So we’ve avoided the double dip – for now – but recovery remains fragile, as the economy wobbles back onto its feet amid Emergency Budget cuts and the big public spending squeeze.

Meanwhile, the Monetary Policy Committee is also trying to shore up the UK economy – yesterday (8 July 2010) it kept interest rates the same for the 16th consecutive month while the quantitative easing programme also remains unchanged.

• Read the bulletpoints from the BCC’s survey.