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Economy may already be contracting

Q1 prospects for 2012 look fragile

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The economy is at serious risk of contracting over the next three months as the services sector falters, according to a new business trends report published on Monday.

The faltering recovery is largely attributed to a slowdown in the services sector, which makes up three quarters of economic output, said the latest Business Trends report by accountants BDO.

Despite recent better than expected figures, short-term trading prospects for businesses have continued to plummet. BDO analysis showed that turnover expectations over the next three months was at its lowest level since June 2009, suggesting the economy could already be contracting.

Prospects for the first quarter of next year continue to look fragile as business confidence also falls below expectations, the firm said.

A further cause for concern was the worsening jobs market, which according to the firm's analysis showed recruitment was likely to remain weak.

Peter Hemington, partner at BDO, said: "Despite official GDP figures for Q3 exceeding expectations, the UK's economic recovery remains sluggish and we could already be entering a period of negative growth.

Hemington urged the chancellor "to tackle the slowing recovery head on in his Autumn statement by reforming the tax system.


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