A top British business leaders' network on Sunday said it was upbeat about the country's economic prospects but warned that the chances of a "relapse" were still high. The British Chambers of Commerce (BCC) said it expected gross domestic product (GDP) to increase by 1.1 percent in 2010 - up from the 0.6 percent rise it home predicted in June.
It also said it expected unemployment to peak at just above three million - 9.6 percent of the workforce - rather than the 3.2 million it predicted in its last forecast. However, the BCC warned that exports, consumer spending and investment had to strengthen to sustain the recovery.
The chambers urged the British government to avoid increasing business taxes, saying public sector reforms were the key to balancing the books. "The upturn in the economy has probably started and we could see a relatively strong bounce-back in the next few quarters," said BCC chief economist David Kern.
"But sustaining the recovery will be very challenging and the risks of a relapse are high." The BCC said GDP was likely to be down 4.3 percent in 2009, with debt on course to exceed 80 percent of GDP.
"The painful but necessary reduction in government debt and borrowing, which will have to be implemented soon, should entail curbing public spending in all areas, except for vital business infrastructure expenditure," said BCC director general David Frost.
"Given the perilous state of our public finances, we cannot afford to ring-fence other spending categories, no matter how desirable it may be. Reform of the public sector must be part of a credible plan to cut spending."