The growth expectations for the UK economy have been downgraded by the British Chambers of Commerce (BCC), which has also predicted interest rates will rise.
The British Chambers of Commerce anticipates interest rates rising to 1.25 per cent by the second quarter of 2020, with rate rises expected in the first quarter of 2019 and second quarter of 2020.
Forecasts of GDP growth for 2018 went down from 1.3 per cent to 1.1 per cent, according to latest predictions.
The BCC has also downgraded its GDP growth forecast for 2019 from 1.4 per cent to 1.3 per cent.
The latest forecast implies that by 2020 the UK economy will have experienced its second weakest decade of average annual GDP growth on record.
According to the British Chambers of Commerce, the downgrades to the forecasts for growth in 2018 and 2019 have been driven by a weaker outlook for trade investment.
Due to Brexit uncertainty and the expected slower growth in key markets, net trade is expected to make a negative contribution to GDP growth over the forecast period.
British Chambers of Commerce forecast that business investment will remain weak, with growth of 1.0 per cent in 2018, 1.2 per cent in 2019, and 1.4 per cent in 2020.
Dr Adam Marshall, director general of the British Chambers of Commerce, said: "Despite strong performances by some firms, the UK economy as a whole is set to grow at a snail's pace.
"Brexit uncertainty continues to weigh heavily on many firms, as most of the practical questions facing trading businesses remain unanswered. The lack of precision on the nature of the UK’s future relationship with the EU is lowering expectations for both business investment and export growth.
"The drag effect on investment and trade would intensify in the event of a ‘messy’ and disorderly Brexit. Businesses need the Brexit negotiations to deliver clarity, precision and results at pace over the coming weeks."
The body has said that the total investment growth went down in 2018 to 1.4 per cent, down from 1.8 per cent in the previous forecast, with growth of 1.4 per cent in 2019 and 1.5 per cent in 2020.
The BCC has said that the government must provide precision on the nature of any future relationship with the EU and answer the practical questions that firms have, in order to ensure that businesses grow.
Suren Thiru, head of economics at the chamber, said: "Mounting uncertainty and the cost of doing business in the UK is likely to put a brake on investment intentions, while for exporters a combination of moderating growth in key trading markets and Brexit uncertainty are forecast to limit export activity.
"Despite the downgrades to our growth forecast, the risks to our outlook remain tilted to the downside. A messy Brexit could further limit the extent to which the UK economy is able to grow, while the prospect of a renewed decline in sterling could increase the squeeze on consumers and businesses. A material broadening of global trade disputes, could also weigh further on economic activity in the UK."
rosie.quigley@ft.com
