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As the United States-British military campaign in Iraq entered the 13th day with hopes of a swift war fading away as a result of stiff resistance by Iraqis, fears in the country of the war's impact on growth prospects of the British economy are growing.
Analysts in London believe the growth of the British economy, which has been on a decelerating trend in the past three years against a background of global decline, would be further hurt as the war drifts into indefinite uncertainties.
From 2000 to 2002, the British economy registered consecutive growth of 3.5 percent, 2.4 percent and 1.8 percent respectively.
At the beginning of the year 2003, economists broadly expected the British economy to reverse the downward trend as the dampened world economy also entered a critical period for a long-awaited recovery.
However, the economists' good-will expectations for a recovery conditional on a speedy finish of the war have been swept away by the reality in the battlefield.
Global stock markets have been following a continuous plunge in the last few days while oil prices on world markets have been on an upswing because of fresh worries of potential impacts on the world economy if the US-led forces are mired in a protracted Iraq war.
Shares of British companies were themselves gravely impaired as the lackluster mood in the markets pulled investors away from an earlier upbeat buying rebound when the war was expected to be brief.
The rise of oil prices has increased industrial costs.
British Chemical Industries, the largest chemical products company in the country, announced last week that its profits in the first quarter of this year were expected to decrease by 20 percent because of higher costs.
Transportation and electricity businesses are also expected to be badly affected, business analysts said.
The war produced more burdens for companies struggling to evade insolvency, especially those in the manufacturing sector, which is facing new rises in National Insurance (NI) contributions starting on April 6, under the government's fiscal budget of 2002-2003.
A business survey conducted by the British Chambers of Commerce said 20 percent of businesses surveyed were considering dealing with the rise in NI contributions by cutting jobs. Others planned to cut salaries and reduce investment spending.
The war also dampened business confidence, financial activities and investment intentions.
The war budget is another factor casting gloom over the Britisheconomy. Britain so far has allocated three billion pounds (4.74 billion US dollars) for the war on Iraq.
Analysts said the longer the war lasts, the heavier the funding burden would become, and this would add to the 8.7-billion-pound (13.746-billion-dollar) budget deficit seen last year.
Humanitarian and emergency aid as well as reconstruction in post-war Iraq will also cost British tax payers extra money, which might lower their consumption spending.
According to Chancellor of Exchequer Gordon Brown's budget, thegovernment would put more money into national medical care, education and security sectors to improve their service standards this year.
So observers in london believe the British budget would face a bigger black hole this year which in turn, might make government policy makers feel constrained when considering public investments.
Fears about the war also shook the British consumers' confidence which had been the key to maintaining a rather vibrant economy compared with its industrial partners in the developed world.
A survey by Martin Hamblin Gfk conducted between February 27 and March 18, two days before the start of war in Iraq, showed that the war pushed British consumer confidence to its lowest level in seven years.
Twenty percent of Londoners hunting for bargains in the Januarysales -- they had not been as eager even before the war started onMarch 20 -- preferred staying at home now rather than going out intheir spare time, another survey found.
The sharp decrease of both foreign and domestic tourists suggests thinner business profits for hotels, restaurants and theaters, while the property markets, which came into a new booming cycle from the start of 2001, saw for the first time a zero prices growth in March.
The business environment in continental Europe and the United States is very important for the economic growth of Britain whose exports and inward investments have mainly depended on the two economies.
But so far all indications point to deteriorating economic prospects of both regions owing to a longer-than-expected Iraq war.
The International Monetary Fund warned in its Global Financial Stability Report last Thursday that a prolonged war in Iraq could dampen the already fragile global economic recovery.
If so, the British outward business environment would be even worse and its export market would shrink further, while inward investment would be harder to pick up.
Economists here believe the adverse impact of war on the British economy has obviously been felt across-the-board by the Britons, although the extent of such impact is still unclear.
(Xinhua News Agency April 2, 2003)
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