Trade deficit 'economic time bomb'
A leading business group has downgraded its UK growth forecast for this year after a disappointing first quarter and sounded a warning about the "time bomb" of Britain's surging trade deficit.
The British Chambers of Commerce (BCC) said it expected gross domestic product (GDP) to grow by 2.3%, down from a previous prediction of 2.7%, though it expected the slowdown to be temporary.
BCC director-general John Longworth said the UK was "heading the wrong way" on trade, with Britain's expansion built on consumer spending - a "systemic weakness for years" - as the forecast predicted export growth slowing next year.
The cut to the overall GDP growth outlook for the year comes after figures from the Office for National Statistics (ONS) showed that in the first quarter of 2015 it slipped to 0.3%, its weakest pace since the end of 2012.
Mr Longworth said: "It is always disappointing when we have to downgrade our growth forecast, but the unexpectedly low figures from the ONS on Q1 2015 make it unavoidable."
The BCC's economic forecast sees earnings growth accelerating over the next three years, but youth unemployment remaining high and the trade deficit - the shortfall between imports and exports - rising.
Mr Longworth said: "The one area which causes most concern is the increasing trade deficit.
"The growth we see is built on consumer spend and this has been a systemic weakness for years.
"Despite good intentions, we are heading the wrong way.
"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. "
The BCC's forecast also pencilled in a rise in interest rates to 0.75% in the second quarter of next year.
BCC chief economist David Kern said: "In spite of the downgrading of our 2015 growth forecast, UK prospects remain solid overall.
"The slowdown this year is likely to be temporary.
"Earlier falls in oil, food and other commodity prices continue to support UK growth, and Britain's flexible and vibrant labour market is a major source of strength for our economy."
He added: "Our new forecast suggests that we will remain near the top of the G7 league table over the next three years."
The forecast cut comes after the Bank of England last month slashed its outlook for 2015 from 2.9% to 2.5%.