The British Chambers of Commerce has upgraded its GDP growth forecast for this year from 1.1 per cent to 1.4 per cent, though this rate of growth would still be considerably lower than what is expected by the Bank of England and the Office for Budget Responsibility.
The BCC said that the upgrade was based on stronger than expected growth at the end of 2016 and that it still anticipates the UK's economy expanding "materially below trend over the near term" as a consequence of the Brexit vote and its adverse economic consequences.
It has also downgraded its 2018 GDP growth forecast from 1.4 per cent to 1.3 per cent.
"The resilience in consumer spending, a key driver of UK growth, will slowly dissipate over the coming months as higher inflation and muted wage growth combine to erode consumer spending power," said Suren Thiru, economist at the BCC.
"The imbalances in the economy continue to leave the UK increasingly exposed to economic shocks. While household consumption’s contribution to UK GDP growth is likely to decrease over the near term, the slight improvement in investment and trade prospects over the same period is not expected to be enough to prevent a slowdown in overall growth.”
Last week the OBR, alongside the Budget, upgraded its 2017 growth forecast to 2 per cent, up from 1.4 per cent previously. That brings it into line with the Bank of England, which projected 2 per cent growth in its February Inflation Report.
However, the OBR downgraded growth forecasts for future years and still expects the level of GDP at the end of its five year forecast period to be just as weak as it did in November due to the impact of Brexit.
Last March, three months ahead of the Brexit vote, former director general of the BCC John Longworth, was suspended after he told its annual conference that the UK's economic prospects could be "brighter" outside the EU.
This view went against the perspective of the majority of the lobby group's members. Mr Longworth later resigned.
In the detail of its latest forecast, the BCC now projects inflation to hit 2.4 per cent this year and peak at 2.7 per cent in 2018.
It sees this inflation slowing consumer spending as real wages are hit.
Adam Marshall, the BCC's director general, described Philip Hammond's Budget last week as a "missed opportunity" to reduce the tax burden on business and to encourage investment.
"With several years of unspectacular growth ahead, coupled with inflationary pressures and the uncertain outcome of Brexit negotiations, it has never been more important to tackle the long-standing constraints that limit business confidence and growth here at home," he said.Reuse content