UK Should Build Homes to Spur Growth: Business Lobby

The UK government should stimulate the economy by building more houses, the British Chambers of Commerce (BCC) told CNBC on Friday, after the lobby group slashed its growth forecasts for 2012 and 2013.

London Housing
Allan Baxter | Image Bank | Getty Images
London Housing

The BCC, which represents more than 100,000 businesses, now forecasts the U.K. economy will shrink[learn more] by 0.4 percent this year, before growing 1.2 percent in 2013. In its previous estimate, the BCC forecast the U.K. would grow 0.1 percent in 2012 and 1.9 percent in 2013.

Speaking on CNBC’s “European Closing Bell”, BCC Chief Economist David Kern advised the coalition government to combat the economic malaise by implement supply-side stimulus measures, while continuing with, or accelerating, spending cuts.

In particular, Kern advocated increased home-building as a short-term stimulus measure, along with cutting national insurance contributions, which U.K. workers and employers pay towards the costs of certain state benefits.

“It is obvious we are not building enough houses… we have crazy housing restrictions,” Kern said.

A number of indicators suggest U.K. house prices are still rising, despite the stagnating economy. Building society Nationwide’s house price index showed a 1.3 percent month-on-month rise in August, its strongest gain since January 2010.

Commenting on this, Kern said: “Our housing market is still much more resilient than in the U.S.

To view David Kern's appearance on CNBC, click here.

— By's Katy Barnato