It now expects growth in 2015 to be 2.4% rather than the previously predicted 2.6%, while its forecasts for both 2016 and 2017 have been revised down from 2.7% to 2.5%.
Though the BCC “believes the UK economy is set to continue expanding at a moderate pace” – on the back of strong service sector growth and increased consumer spending – it highlights lower-than-expected net trade, and weaker-than-anticipated manufacturing figures, as the reasons for its downgrade.
The BCC’s revised Economic Forecast came just a day after the Office for National Statistics (ONS) published its Index of Production for October 2015.
The ONS figures mirror the BCC’s narrative, estimating that the UK’s total production output increased by 1.7% in October compared to the same month last year, but with manufacturing the only one of the four main sectors to record a decrease in output (down 0.1%).
Manufacturing output remains 6.1% below its pre-recession peak of Q1 2008, though this is still a less sharp decline than for production as a whole (down 8.9%).
So, what does all this mean for the months ahead? Certainly, insight from experts and analysts seems to suggest that the “dominant” services sector will continue to drive Britain’s economic growth, with manufacturing held back by the strong pound and weak export demand.
Meanwhile, there remains concern that increased consumer spending – while crucial to a successful economy – is still being driven by debt, raising fears of another boom and bust cycle.
Just today, the International Monetary Fund (IMF) has given its own assessment of the state of the UK economy, praising recent “very strong” growth – as well as increased employment and reduction of the fiscal deficit – but again flagging up high household debt levels and uncertain productivity prospects as concerns.
With the BCC also predicting an increase in interest rates for Q3 2016, and IMF head Christine Lagarde warning about the potential impact of Britain leaving the EU, it looks like the main economic certainty of 2016 might be more uncertainty – with those calmer waters still tantalisingly out of reach.
Written by Graham Soult
Image credit: Asif Akbar