The British Chambers of Commerce (BCC) has downgraded UK GDP growth In its Economic Forecast, released today.
Weak net trade and manufacturing figures are said to be the main reasons behind the downgrade.
The BCC believes the UK economy is set to continue expanding, but at a slower pace – down from 2.6% to 2.4% in 2015; 2.7% to 2.5% in 2016; and 2.7% to 2.5% in 2017.
The manufacturing sector is expected to reduce by 0.2% in 2015, though the trend should take an upswing in 2016 and grow to 0.7% and 2.0% in 2017.
Director general of the British Chambers of Commerce, John Longworth commented: “Official data is starting to reflect what our Quarterly Economic Survey has been showing all year – that our persistently weak trade performance and current account balance are impacting our overall growth.
“Similarly, the manufacturing sector has been hit badly by falling global prospects, tipping an earlier prediction of growth in 2015 to an expected contraction.”
The forecast suggests UK business investments are predicted to grow by 6.2% in 2015, 7.4% in 2016, and 7.4% in 2017.
The director urged: “The UK still needs to see a fundamental shift in its economic model if we are to remain relevant and prosperous in a changing world economy.
“Anyone who says that the job is nearly done needs to look again at the trade deficit, current account position and long-term business investment – and realise there’s still a long way to go.”
Despite the encouraging UK unemployment figures showing a 0.3% decrease between 2015 and 2018, the BCC also forecasts the total industrial output is supposed to slow down in 2016 and pick up its pace in 2017.
The growth is mostly being driven by a strong service sector and consumer spending, it said.
The Government’s attempt to rebalance the economy towards industrial production and manufacturing, has been deemed a “failure” by Longworth.
He continued:“Consumer spending and debt are still the drivers of the economy.
“Without a rebalancing we remain in a cycle of boom and bust, though I don’t think the Government has a real strategy for rebalancing the economy.”
The British Chambers of Commerce’s chief economist, David Kern added: “Despite our downgraded forecasts, GDP is likely to continue expanding broadly in line with the UK economy’s long term growth trend.
“However, services and household consumption remain the main drivers of UK growth, and their contribution to GDP is set to rise even further in the next few years.”