U.K. Growth at Risk as Strong Pound Hampers Export Demandby
Manufacturing export balance declines to six-year low
Bank of England should keep key rate at 0.5%, BCC says
The U.K. economy is losing momentum and manufacturing export sales are in their weakest state in more than six years, according to the British Chambers of Commerce.
In its quarterly report published Thursday, the London-based business group said its key measures of services and manufacturing weakened at the end of the year. Factory indexes fared worse, with many companies citing the strength of the pound as their biggest concern.
The survey paints a picture of an economy that’s under pressure from global turmoil, and the worsening outlook adds to reasons for the Bank of England’s Monetary Policy Committee -- which announces its latest policy decision on Jan. 13 -- to keep interest rates at a record low. It’s the third gloomy assessment of the economy this week after reports from Markit signaled a loss of growth momentum in December.
“The falling balances in the fourth quarter highlight the risk that the pace of growth may slow further in the short term,” said David Kern, chief economist of the BCC. “Though wage pressures are rising, inflation is likely to remain below target over the next 18 months. The MPC should therefore keep interest rates at their current low for the time being.”
The BCC cut its forecast for 2016 growth last month to 2.5 percent from 2.7 percent, citing a worsening global outlook. In its latest survey, manufacturers also cited competition and inflation among the biggest external concerns. Service sector firms were most worried about competition, inflation and business rates.