U.K. Government Needs to Do More to Boost Weak Economy, BCC Says

U.K. Prime Minister David Cameron needs to do more to revive the stagnating economy, the British Chambers of Commerce said after publishing a report showing business confidence weakened this quarter as demand declined.

Gauges of domestic and export sales at factories and services companies dropped from the previous three months, the London-based business lobby said in a report today, citing a quarterly survey. Expectations measures, including export orders and investment intentions, also declined.

As Cameron’s Conservative Party prepares for its annual conference this weekend, the BCC said the government should introduce measures to boost infrastructure investment and capital allowances to encourage companies to spend. The opposition Labour Party called yesterday on Cameron to use funds from the planned sale of fourth-generation mobile-phone spectrum to fund homebuilding.

“U.K. economic performance remains weak and inadequate,” BCC Chief Economist David Kern said in a statement. “The economy has been stagnant for too long and urgent measures are needed to enable businesses to drive a sustainable recovery.”

For manufacturers, the BCC’s measure of domestic sales fell to 3 this quarter from 9 in the second quarter, while the export sales index dropped to 13 from 31. At services companies, domestic sales fell to 1 from 10 and export sales slipped to 19 from 24.

Measures of orders in both industries also fell this quarter, as did gauges of investment in plant and machinery as well as training. The BCC’s survey was based on 7,593 responses to a questionnaire between Aug. 20 and Sept. 12.

Fiscal Squeeze

The U.K. economy shrank for a third consecutive quarter in the three months through June. Data on Oct. 25 will show whether the economy rebounded in the third quarter from the disruption caused by an extra public holiday for Queen Elizabeth II’s jubilee in June.

Part of the economy’s weakness relates to the government’s fiscal squeeze, which Chancellor of the Exchequer George Osborne says has helped to insulate Britain from the euro-area debt crisis.

“Economic growth is weak and businesses are less confident and less likely to invest than they were at the beginning of the year,” said John Longworth, director general of the BCC. “The survey results should be a clear signal to government that more needs to be done to stimulate growth alongside continued deficit reduction.”

The BCC didn’t comment on monetary policy in today’s report. It said last month that the benefits of so-called quantitative easing have “diminished” and the Bank of England could help boost credit by purchasing assets other than gilts, such as securitized business loans.

All 40 economists in a Bloomberg News survey forecast that the central bank will keep its bond-purchase target at 375 billion pounds ($605 billion) when the Monetary Policy Committee announces its monthly decision on Oct. 4.

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