Levels of business investment will drop faster and recover slower than expected as a direct result of uncertainty surrounding Brexit, according to the British Chambers of Commerce (BCC).
Manufacturing industries started stockpiling raw materials earlier this year, which gave a boost, but the BCC said firms are investing in contingency plans that are not "sustainable".
The BCC's latest economic growth forecasts assume that the UK will avoid a "messy and disorderly" Brexit. It expects growth to be slightly ahead of expectations for 2019, revising its forecast from 1.2% to 1.3%. However, its forecast for 2020 has been downgraded from 1.3% to 1.% and from 1.3% to 1.2% in 2021.
BCC head of economics Suren Thiru, said: "The downward pressure on business activity and investment intentions from the unwinding of stocks is likely to be exacerbated by increasing cost pressures and Brexit uncertainty, slowing overall economic growth across the forecast period.
"The deteriorating outlook for business investment is a key concern as it limits the UK's productivity potential and long-term growth prospects."
