Economic growth is set to slow "markedly", with a worsening impact on manufacturing firms, a gloomy report predicted today.
The British Chambers of Commerce reduced its growth forecast for this year from 2.5 per cent to 2.4 per cent and highlighted the "acute risks" facing manufacturing.
It said in its quarterly forecast that the sharp slowdown would be driven by lower growth in household consumption, with personal spending dampened by higher personal debt and a cooling housing market.
The "very weak" performance of manufacturing will worsen the downward pressures on the economy.
BCC economic adviser David Kern said: "The business climate will become riskier and more difficult over the next 12-18 months. UK growth is set to remain higher than in the Eurozone.
"But weak and inadequate Eurozone performance will exacerbate global imbalances and worsen the problems facing UK exporters.
"The very weak and disappointing manufacturing performance will exacerbate the downward pressures on the economy. Our forecast for manufacturing output growth is reduced sharply, to minus
0.4 per cent in 2005 and 1.5 per cent in 2006. There is a distinct risk of an even worse manufacturing performance."
The BCC said the risk of an interest rate rise later in the year had diminished considerably but warned that an increase would be "unnecessary and potentially harmful", especially for manufacturing companies.
It added: "UK economic performance has been satisfactory in recent years but growth is slowing, both globally and in the UK, and the business climate is becoming riskier and more difficult."
