Rising inflation and reduced consumer spending have prompted the British Chambers of Commerce to trim its economic growth forecast for the next 18 months.
The BCC now predicts the economy will expand by 1.3% this year, against its previous estimate of 1.4%, with growth of 2.2% next year, down from 2.3%.
It also believes the Bank of England will keep interest rates on hold for longer as the economy struggles to gain momentum. It expects the Bank to raise the base rate from 0.5% to 0.75% in August. It had previously pencilled in a rise in May.
The BCC's forecast is gloomier than the outlook from the Office of Budget Responsibility, which sees growth of 1.7% this year.
But despite its reduced forecast, the BCC says the government must continue to cut public spending to reduce the budget deficit.
BCC director-general David Frost said he expects the impact of increased exports and higher business investment will filter through to the wider economy by the end of this year.
