Recession looms as firms face double whammy

Recession looms as companies face double whammy of falling orders and rising costs

The UK is now "at serious risk" of recession as falling orders and rising costs tighten the squeeze on business, the British Chambers of Commerce (BCC) has warned.

Companies are facing soaring costs from rising electricity bills and raw materials as oil approaches US$150 a barrel, while banks hit by the crunch clamp down on lending.

This has put cashflow among UK firms under the most pressure since 1992, the BCC said, which surveyed almost 5,000 firms.

The BCC said the balance of manufacturers intending to raise prices had reached a new all-time high, at 45 per cent, for the third quarter in a row, with the raw material increases also hitting the services sector. This adds to the inflation pressure.

Confidence among services firms, which the BCC says account for almost three-quarters of the economy, is also at its lowest ebb since 1990, the survey added.

Such firms saw "alarming" declines in the second quarter of 2008, with those reporting lower orders outnumbering those recording rises for the first time in 18 years.

The BCC also warned the government against hitting firms with more taxes in an effort to boost public revenues as the economic gloom grows.

The BCC's economic adviser, David Kern, said the survey showed a "menacing deterioration" in UK prospects: "The outlook is grim, and we believe that the correction period is likely to be longer and nastier than anticipated."

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