UK economy 'weak but showing signs of improvement'

The UK economy has shown a few signs of improvement in the first three months of this year, the British Chambers of Commerce (BCC) has said.

The latest quarterly economic survey by the business lobby said that domestic orders and exports were all higher from the previous quarter.

The BCC had previously warned of "stagflation".

But the UK economy "is still facing huge challenges and the recovery is much too slow", the BCC said.

The group expects economic growth of 0.3% in the first quarter of 2012, which would mean the UK would avoid a technical recession - defined as two consecutive quarters of contraction.

Last week, the international economic think tank, the OECD, said it expects the UK economy to contract at the start of the year, taking the country back into recession.

But on Monday, data suggested the manufacturing sector grew at its fastest pace for 10 months in March in an encouraging sign that the economy could return to growth in the first quarter, after contracting by 0.3% in the last three months of 2011.

Crewe-based carmaker Bentley told the BBC that it had been a good start to the year, with demand for its luxury vehicles continuing to gather pace from China.

Image caption The BCC has previously warned about "stagflation" in the UK economy

"So far this year we have seen even more growth from China, another increase, and we expect China to beat the US [as its most important export market] this year," said Michael Straughan, head of manufacturing at Bentley.

"This is really good news for the UK. For every person that is employed in car manufacturing, there are 10 other employees in the supply base," he said.

Bentley has just received £1.7m in government money to help train 500 new staff.

'Forceful measures'

It was a different picture for retailers at the start of the year, however, as official figures showed a sharp drop in sales volumes in January and February. But the good weather in March could help sales, analysts suggest.

The BCC predicted that the economy would grow by just 0.6% across 2012.

The independent Office for Budget Responsibility, which provides the government's forecasts, has predicted growth of 0.8% in 2012.

Confidence among businesses increased on the previous quarter, but remains weak by historical standards, the British Chambers of Commerce said.

The group forecasts unemployment, which currently stands at 2.67 million, will rise to 2.9 million over the next year.

It called for "forceful measures" from the government to help boost growth.

"It's encouraging to see that businesses are feeling more confident at the start of 2012 than they were at the end of 2011," said John Longworth, director general at the BCC.

"But that underlines the need to support and foster growth and investment by companies to ensure that the increases we have seen in the first quarter continue."

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