The Ernst & Young Item Club has lowered its GDP growth forecast for the UK in 2011 to just 1.4 per cent in its latest quarterly report, which is out tomorrow.
The European sovereign debt crisis has led to the 0.4 per cent decrease since its last report in April. The report is expected to say that UK exports are back to pre-recessionary levels but that concerns over the global economy has led to businesses making the decision to hold back on investment.
This has led to a slight revision for growth next year, down 0.1 per cent to 2.2 per cent. Peter Spencer, chief economic adviser to the Item Club, will say: "The uncertainty about Greece and the EU periphery will continue to act as a damper on business investment in the UK, long held up as one of the torches that would light the way to recovery."
The Item Club's forecasts are based on the Treasury's model of the UK.