The British Chambers of Commerce yesterday cut its forecast for the UK's economic growth in 2015 following a weak start to the year and, even as it expected a steady recovery, it warned the country's vast trade deficit was a "timebomb".
The economy would expand 2.3 per cent this year, according to the BCC, down from its previous projection of 2.7 per cent and reflecting weak growth of 0.3 per cent quarter-on-quarter in the first three months of 2015.
"While this slowdown will serve as a warning about the strength of our economic recovery, we believe the UK will secure steady growth in the years to come," said John Longworth, the BCC's director general.
Economists polled by Reuters expect the UK economy to expand around 2.5 per cent this year and 2.4 per cent in 2016.
The BCC said it expected a solid uptick in earnings over the next few years, and further declines in the UK's unemployment rate.
It, however, warned that the recovery had been too reliant on consumer spending, and highlighted the UK's trade deficit as the most pressing worry.
The goods trade deficit increased in the first quarter of 2015 to nearly £30 billion, underscoring one of the economic challenges facing prime minister David Cameron's government following elections.
"The trade deficit is an economic time-bomb waiting to go off. We have to confront it head-on and that means getting more of our businesses exporting their goods and services overseas," said Longworth.
The BCC said families would finally feel the benefits of the UK's recovery this year through stronger pay growth, even as the recovery slowed.
According to the BCC, sluggish early growth meant the UK economy was expected to expand by only 2.3 per cent this year, down from a prediction of 2.7 per cent in March.
While consumer spending would be expected to support the recovery over the next few years, the BCC called for more action for rebalancing the economy.
The UK economy saw a growth of just 0.3 per cent in the first three months of this year, with the trade deficit knocking a massive 0.9 percentage points off growth. ''We have to confront (the trade deficit) head-on and that means getting more of our businesses exporting their goods and services overseas,'' he said. ''This is the best route to securing high levels of sustainable growth over the long-term.''