UK Economy on Knife-Edge, Needs More Government Rethink: BCC

Britain will likely avoid sliding back into recession this year, thanks to solid growth in overseas markets, but the the government needs to do more to intice banks to lend into a weak economy, the British Chambers of Commerce said Tuesday.

The group expects the UK's £1.1tn economy to expand by around 0.3 percent in the first three months of this year - a figure that's slightly better than analysts's forecast but in-line with recent manufacturing data. It's full-year growth estimate, however, is 0.6 percent - marginally slower than consensus. The independent Office of Budget Responsibility recently raised its forecast for growth to 0.8 percent for the full year.

"The U.K. economy is still facing huge challenges and the recovery is much too slow," said John Longworth, the BCC's Director General. "It has the potential to recover, but to achieve that the government has to set businesses free to grow."

The trade group, which represents the firms that employ around one fifth of Britan's private workforce, also published a quarterly survey of business activity which suggested export orders were highest in at least a year.

BCC offficals, however, cautioned that the government's plans to reduce debt and cut public spending would continue to be a drag on economic performance. Slower growth in the public sector, the BCC said, would need to be offset by a more dynamic the private sector - and that requires more lending from the nation's banks, particularly to small and medium-sized businesses.