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Fears over recovery as economic growth stalls

ECONOMIC growth pulled back sharply in the fourth quarter of 2010 and the risks of a setback to any recovery remain serious in the year ahead, according to the British Chambers of Commerce (BCC).

ECONOMIC growth pulled back sharply in the fourth quarter of 2010 and the risks of a setback to any recovery remain serious in the year ahead, according to the British Chambers of Commerce (BCC).

The BCC’s latest quarterly survey, which was far more downbeat than that from the North East Chamber of Commerce a day before, signalled gross domestic product growth slowing to around 0.4% or 0.5% in the final three months of last year.

This would be a marked slowdown on the 0.7% recorded in the third quarter and comes after a “disturbing“ recent performance from the services sector, compounded by last month’s Arctic conditions.

BCC chief economist David Kern said while the private sector was expected to be robust enough to withstand government spending cuts, the fourth-quarter performance in the service sector showed the threat still posed to recovery.

He said: “Unless reversed, weaknesses in services could have adverse consequences, particularly for jobs. While we expect the private sector to prove sufficiently robust to withstand the impact of the tough deficit reduction programme, the UK recovery is fragile.”

The national survey contrasted dramatically with the North East Chamber of Commerce’s own quarterly report which found that businesses in the region said domestic sales and orders are at their highest level for three years.

The NECC said the region has “entered 2011 on a really positive note” and that 7.8% more firms in its sample said UK sales had gone up in the fourth quarter compared with the third quarter, while 12.5% more said UK orders had gone up rather than down.

On balance 6% of companies saw export sales and orders rise in the fourth quarter although this was slightly down on the third quarter.

The BCC survey of 5,600 responses across the business sector suggested the manufacturing industry was the star performer of the fourth quarter thanks largely to export sales.

Export orders and sales rose to their highest for 16 years and the second highest since the survey began.

 

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