BCC Forecasts Modest U.K. Recovery as Confidence Rises

The U.K. economy will have a “modest” recovery this year and business confidence is strengthening, according to the British Chambers of Commerce.

A gauge of sentiment rose “markedly” in the fourth quarter, though it remained weak by historical standards, the London-based group said in a quarterly survey today. Measures of domestic and export orders at both manufacturers and services companies rose, it said.

“The economy is making progress, despite the numerous challenges it has faced,” said BCC Director General John Longworth. “Despite rising business confidence that the outlook will improve, it is clear that economic growth remains weak and that nurturing it must be a top priority.”

Today’s survey follows similar reports yesterday that said companies are becoming more optimistic in the economy, while data last week showed that the Bank of England’s new efforts to boost credit are beginning to yield results. Still, services unexpectedly slumped in December, highlighting the fragility of Britain’s recovery.

The Bank of England’s Monetary Policy Committee will keep its bond-purchase program at 375 billion pounds ($602 billion) on Jan. 10, said all 39 economists in a Bloomberg News survey. It will also leave the benchmark interest rate at a record-low 0.5 percent, according to a separate poll.

Export Demand

The pound fell 0.2 percent to $1.6090 as of 7:44 a.m. London time. It weakened to 81.52 pence per euro, from 81.39.

The BCC, which surveyed 7,662 businesses between Nov. 12 and Dec. 5, said its results suggest the economy didn’t shrink in the fourth quarter. Manufacturers’ export orders rose to 11 percent from 8 percent in the previous three months, while services export orders increased to 18 percent from 15 percent.

Manufacturers’ confidence that turnover will improve in the next 12 months to 41 percent in the fourth quarter from 32 percent in the three months through September, while the profitability balance increased 12 points to 30 percent. Services companies’ confidence in turnover rose 10 points to 38 percent, the most since 2008. The profit outlook increased to the highest level since 2007.

Separately today, the British Retail Consortium said Christmas was “underwhelming” for U.K. retailers with sales barely rising and the outlook for 2013 is little better.

Sales at stores open at least a year gained 0.3 percent in December from a year earlier, the worst performance since 2010, when snowy conditions deterred shoppers. Total revenue climbed 1.5 percent, but would have fallen excluding buoyant online revenue, BRC Director General Helen Dickinson said. Web sales climbed 18 percent.

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