Tuesday, a quarterly Economic Survey from the British Chambers of Commerce confirmed that the UK recession is still very serious and expects it to continue for some time. The business lobby said there is a clear need for corrective action and urged the government to act forcefully to ease the recession.

The BCC forecasts more than 3% contraction in 2009 GDP. For the first quarter of 2009, a more than 1% decline is expected. According to the business lobby, the steps adopted to alleviate the downturn have failed. The quarterly survey found improvement in services, but these are fragile gains and will fizzle out without supportive policies.

The BCC sees peak of unemployment in the third quarter of 2010 with the number reaching 3.2 million. To avoid further increase in unemployment total, the lobby sought vital reduction in regulatory burden on business.

The manufacturing sector's balances deteriorated again in the first quarter and reached record lows in almost all critical areas. The balances for the service sector showed improvement in most key areas, though they still remain in the negative territory.

The balance for manufacturers' home orders fell 4 points to minus 52%, while that for service home orders rose 7 points to minus 29%. The export sales balance in manufacturing dropped 15 points to minus 27% in the first quarter, which was the weakest result since the third quarter of 1998. On the other hand, the balance for service export orders climbed 3 points to minus 10%.

The employment balance in manufacturing slid 19 points to the lowest since records began in 1989. At the same time, service sector's balance moved up 4 points to minus 18%. Investment intention in manufacturing deteriorated, while that in service improved in the first quarter.

Business confidence in manufacturing fell to a new record low. Meanwhile, services confidence improved in the first quarter. The balance of manufacturing firms reporting pressure to raise prices dropped 7 points to minus 7% and in services, the index slid 1 point to plus 3%.

Commenting, Director General of the BCC, David Frost, said, In the face of recession, the policy stance must remain expansionary and quantitative easing should be aggressively pursued. Frost added, Painful spending cuts will be needed in the medium-term.

Despite the difficult fiscal position, targeted and selected measures are needed in the budget, with a credible plan to reduce the deficit drastically, the BCC said. Chancellor, Alistair Darling will present his Budget statement on April 22.

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