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The economic adviser to the BCC, David Kern, says that he expects UK gross domestic product growth to fall to a 'below trend' pace towards the end of this year and to remain below trend for much of next year.
Mr Kern recently prepared a report for the Jersey Chamber of Commerce on the future of the Jersey economy and was the guest speaker at their luncheon last month.
In a quarterly forecast issued this week, he says that the main driver of the expected UK slowdown is the cumulative effect of the five increases in the Bank of England base rate since August 2006 - most recently to 5.75% - and the likelihood that rates could go up further. As a result, disposable incomes are being squeezed and this will weaken household consumption. The recent strong growth in investment spending is also set to decelerate as the economy slows.
Mr Kern suggests that it is 'critically important' that the bank rate should not go above six per cent, although the possibility of a further rise to 6.25% cannot be ruled out.
Published 15/08/07
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