A JUMP in imports and a fall in exports will spell a fall in UK business this year, according to the latest survey by Oxford economists.

Oxford Economic Forecasting and the London Business School both say that gross domestic product (GDP) will fall slightly in each of the first two quarters of 1999.

This partly reflects the sharp deterioration in trade performance over the last year, with exports (excluding oil) falling 2.2 per cent in the three months to November against the previous three months, with a 2.7 per cent rise in imports.

But they say that investment in business has reached record levels, particularly in service industries.

The downturn, now confidently expected this year, will be milder than in 1990-91 - thanks in part to much lower inflation at two per cent.

The economic gurus expect GDP to grow by just 0.4 per cent in 1999, compared with 2.5 per cent last year.

Consumer demand has been disappointing lately, with retail sales down 0.2 per cent in the final quarter of 1998.

Interest rate cuts and recovery in the equity market have helped but consumers are reluctant to part with hard-earned cash in the face of increasing pessimism about job prospects, they say.

Thames Valley Chamber of Commerce has dismissed claims that the region's economy is heading for recession, even though it acknowledges that engineering and manufacturing output are slowing down.

Policy manager Mark Sharman said: "All the long-term indicators remain positive. Business in the region is still experiencing shortages of skilled staff and we do not believe that a recession is around the corner."

Story date: Wednesday 17 February

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