BCC slams Brown’s ‘alarming’ trade figures
The British Chamber of Commerce (BCC) piled the pressure on Chancellor Gordon Brown yesterday, calling Britain’s manufacturing figures “alarming”.
Even worse, the struggling manufacturing sector missed out on a much-needed boost from Britain’s bigger service sector, which simply failed to materialise. Manufacturing’s domestic balance fell from 19 per cent in the second quarter to 3 per cent in the third.
The BCC’s director general David Frost said: “Manufacturing has persistently failed to sustain recovery, and the technical recession seen in the first two quarters of 2005 is very worrying.”
Frost described service sector performance as “mediocre”. After a terrible second quarter, economists had expected a real improvement, but the change was only marginal. On Wednesday the OECD took its 2005 growth forecast down to just 1.7 per cent from a previous forecast of 2.5 per cent.
Brown’s public spending plans are predicated on a forecast that the British economy will grow by 3 to 3.5 per cent this year. Most neutral observers believe he will now have to raise taxes in the next budget if he wants to balance the books. Politically, however, increased public borrowing is a far more likely reaction.
Lehman Brothers economist Mike Hume said that if other services data weakens, the Monetary Policy Committee (MPC) would have to think seriously about a rate cut.
Taking Treasury questions in the House yesterday Brown said his spending plans were affordable and blamed high oil prices on the West’s economic troubles. However, this is slightly disingenuous because Britain is not usually a net importer of oil.