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UK business lobby says economy 'treading water' since start of year

Reuters  |  LONDON 

(Reuters) - Britain's has been treading water since the start of the year and pressures are easing, limiting the case for the to raise interest rates next month, the said on Thursday.

The BCC's quarterly economic survey - the largest of its kind - showed a familiar picture of lacklustre domestic demand, only partly mitigated by the boost to foreign demand from the fall in the value of the pound since June 2016's Brexit vote.

"What growth we see in the UK is due principally to strong global trading conditions, rather than domestic demand, which remains muted," the BCC's director-general, Adam Marshall, said.

Britain's recorded the weakest year-on-year growth of any major in late 2017, as consumers struggled with higher caused by the weak pound, and more recent to a further slowdown in early 2018.

However, the BoE said in February that the was close to reaching its capacity to grow without generating excessive inflation, leading investors to predict that a rate rise is coming next month.

Two of the BoE's nine policymakers voted for a rate rise at their last meeting in March, citing evidence of rising domestic pressures in business surveys.

The BCC said this was not the experience of its members. Fewer firms expect to raise prices than in late 2017, and rising pay demands from workers were a problem for under a quarter of businesses, the survey showed.

"is now on a downward trajectory," BCC said. "While we expect interest rates to rise next month, with UK economic conditions subdued and weakening, the case for a further tightening in continues to look limited at best."

Manufacturers in the BCC survey reported the fastest growth in export sales and orders since the second quarter of 2014. But domestic sales grew at the weakest rate since late 2016.

Services businesses reported steady domestic sales growth but only a minimal pick-up in the rate of export expansion.

"Even with a standout performance from manufacturing exporters able to reap the benefits of lower sterling, the UK as a whole is treading water, rather than powering ahead," Marshall said.

The BCC surveyed more than 7,000 businesses from Feb. 19 to March 12, before reached a provisional agreement with the on trading terms after Britain leaves the bloc in just under a year.

(Reporting by David Milliken; Editing by Hugh Lawson)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, April 12 2018. 04:50 IST