Business group BCC cuts its UK growth forecast

It has cut its growth forecast for this year, from 1% to 0.6%, and for next year, from 1.8% to 1.7%.

It is now predicting considerably less growth than the government’s independent forecasters, who say it will grow 1.2% this year and 2% next.

The business group’s cut comes as the Bank of England’s interest rate-setters prepare to make their latest decision.

Interest rates have now been at their record low level for four years and a change on Thursday is unlikely.

But the Bank of England’s rate-setting Monetary Policy Committee (MPC) may decide to expand its quantitative easing (QE) programme, which involves creating money and using it to buy things like government debt.

At the February MPC meeting, Bank of England governor Mervyn King wanted to increase QE by £25bn to £400bn, but was outvoted.

Since then, official figures for growth in 2012 have been revised up from zero to 0.2%.

There was an unexpected fall in manufacturing activity in February and some gloomy construction figures.

But the Markit/CIPS purchasing managers’ index for February suggested strong growth in the services sector.

The BCC predicted that another £50bn would be added to the QE programme, but said it would probably come in May.

It described increasing QE as “unnecessary and unduly risky”.

It predicted that interest rates would stay at 0.5% until the last quarter of next year.

It is expecting that there will be growth of 0.1% in the first three months of 2013, avoiding a triple-dip recession by a small margin.

“We expect quarterly growth to increase very gradually over the next two years, but it will remain modest and below-trend for some time,” said David Kern, chief economist at the BCC.

“In addition, we now expect GDP to return to its pre-recession levels early in 2015, and the squeeze on living standards will continue for a while longer.”