By Jonathan Davies

An early increase in interest rates would be "a huge risk" to the UK economy, according to the British Chambers of Commerce (BCC).

Since the recovery, the economy has largely been driven by consumer spending and mortgages. And the BCC said that means the economy is "particularly sensitive" to any interest rates changes.

UK interest rates have been at the record low of 0.5% since March 2009. But the BCC expects rates to go up to 0.75% in the third quarter of 2015. And it has forecast rates to be as high as 1.75% by the end of 2016.

The warning came as the business lobby group downgraded its growth forecast for the UK. It is now predicting annual growth of 3% in 2014, down from 3.2%, and 2.6% down from 2.8% in 2015. It described the downgrading as an "ominous warning sign".

"Downgrades to our growth forecast are a warning sign that we still face a number of hurdles to securing a balanced and sustainable recovery," said BCC director general John Longworth.

Mr Longworth said that continued concerns over the eurozone economy, slowing growth in emerging markets and political tensions in Ukraine and the Middle East were affecting business and consumer confidence.

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