Business group warns of ‘serious challenges’

The British Chambers of Commerce downgraded its prediction for economic growth in 2012 to 0.6 per cent from 0.8 per cent, rising to 1.3 per cent in 2013.

The Chancellor must “pull out all the stops” to help businesses to drive growth this year, it said in its quarterly economic forecast.

The BCC said that despite weak growth this year, it believed a double dip recession would be avoided, with exports and business investment expected to be the main drivers of growth over the next two years.

Unemployment will increase from the current 2.6 million to 2.9 million at the start of next year, with the jobless rate for 18 to 24-year-olds expected to be around 23 per cent, said the BCC.

Economic growth is likely to weaken in the second quarter of the year because of the extra bank holiday for the Queen’s diamond jubilee, while the London Olympics might distort growth figures in the summer, said the report.

Interest rates will remain at “very low levels” for longer than previously envisaged, staying at 0.5 per cent until the final months of 2013, followed by modest increases, according to the group.

The BCC called on Chancellor George Osborne to take measures in this month’s Budget to help business, including help for smaller firms trading internationally, and deregulation of the labour market.