UK growth to stay sluggish 'for rest of year'

The British economy is set to stall for the rest of the year as nervous businesses remain reluctant to invest in recovery, an influential economic forecaster will warn today.

The Ernst & Young ITEM Club reckons the economy will edge ahead by an anaemic 0.4 per cent in 2012, growing at just half the pace predicted by the Office for Budget Responsibility.

The forecaster blamed sluggish growth in business investment for the shortfall as UK firms stockpile cash balances worth a staggering £754bn. Despite their cash-rich position, business investment grew by just 1.2 per cent last year.

The ITEM Club's chief economic adviser, Peter Spencer, said: "Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list."