Britain's businesses need government support in the "crucial" months and years ahead as a new report suggests economic growth will remain well below historical averages.
Today, the British Chambers of Commerce (BCC) will nudge its 2017 UK growth forecast up from 1.4 per cent to 1.5 per cent, mainly as a result of stronger global outlook growth, including in key markets for UK businesses.
Expectations for growth in 2018 and 2019 remains unchanged at 1.3 per cent and 1.5 per cent, respectively.
While businesses are cautiously optimistic about their own prospects, they remain wary about growth in the UK as a whole. With consumer spending, a key driver of economic growth, seen slowing as inflation erodes real wages, the BCC has called for a cross-party focus on supporting UK business.
Suren Thiru, head of economics at the BCC, said higher inflation will weigh significantly on the UK's near-term growth prospects. Inflation reached 2.9 per cent in May, and the business group expects it to peak at 3.4 per cent this year, a five-year high.
The BCC also predicted the first increase in UK official interest rates, to 0.5 per cent, will occur in the first quarter of 2018, which is three quarters earlier than predicted.
As inflation rises and average earnings growth flat-lines, consumer spending is forecast to remain "persistently" weak over the next few years.
This reinforces the need to create conditions for growth in the UK economy, the BCC said.
Adam Marshall, director general of the BCC, said:
"A cross-party consensus must be sought in Westminster in order to create a UK business environment that supports sustained growth and job creation, even as the new government works to secure the best possible Brexit deal with the EU.
“The cost of doing business in the UK is too high – and weighs on the investment, recruitment and growth capabilities of our firms. Companies are faced with significant currency fluctuations and rising upfront costs, and their growth efforts are hampered by skills shortages and poor physical and digital connectivity.
"Westminster must come together to tackle these issues, which together with a pragmatic and economy-focused Brexit deal, will give business communities the best opportunity to foster lasting growth across the UK."