The British Chambers of Commerce has downgraded its expectations for UK GDP growth for 2022 to 3.5 per cent (from 3.6 per cent) against a deteriorating economic outlook.

Quarterly economic growth is expected to grind to a halt this year before dipping briefly into negative territory as global events continue to weigh heavily on the UK economy.

It now expects the UK inflation rate to reach 10 per cent in Q4 2022, comfortably outpacing average earnings growth.

The heightened economic uncertainty and rising costs are also expected to significantly weaken business investment, with 1.8 per cent growth predicted in 2022, down sharply from 3.5 per cent in the previous forecast.

Expectations for growth in 2022, at 3.5 per cent are now less than half the 7.5 per cent growth recorded last year. Quarter on quarter GDP is expected to flatline with no growth expected in Q2 and Q3 before contracting by 0.2 per cent in Q4.

This negative outlook reflects a combination of soaring inflation, weak business investment, tax rises and the global economic shocks - initially caused by Covid and then compounded by the war in Ukraine. Annual UK economic growth is expected to slow sharply to 0.6 per cent for 2023 before recovering slightly to 1.2 per cent in 2024.

Consumer spending is now forecast to grow at 4 per cent in 2022, a fall from the 4.4 per cent prediction in the first quarter. This reflects the historically high squeeze on real household incomes as inflation far outpaces the forecast 5 per cent growth in average earnings for the year.

Businesses and consumers face unprecedented inflationary pressures flowing from rising raw material costs, the increase in the energy price cap, and upward pressure on energy and commodity prices.

The Consumer Price Index (CPI) inflation rate is expected to reach 10 per cent in Q4 of 2022. This would be the highest since CPI records began in their current form in 1989. CPI inflation is expected to finally fall back to the Bank of England's 2 per cent target by the end of 2024. At the same time the Bank of England interest rate is expected to rise to 2 per cent in 2022 and 3 per cent in 2023. These represent significant shifts from the 1 per cent and 1.5 per cent rates previously forecast in Q1.

Commenting on the forecast, Matt Griffith, director of policy at Business West, said: "It is vital that the government also supports existing strong economic areas like the West Country, and makes sure we have the level of investment in infrastructure, skills, transport and housing we need.

"Recent signals from central government seem to suggest it is not pushing our areas as much as it could on things like housing, providing sufficient employment space and strong local plans. This is not glamorous, but not delivering here risks long-term underperformance and sluggish future growth in incomes and jobs for our people."