The leading business group said it now expects the economy to grow by 1.2 per cent this year, from its previous estimate of 1.3 per cent, and by 0.8 per cent in 2020, down from 1 per cent.

Its GDP growth forecast of 1.2 per cent remains unchanged for 2021.

The business group said it expects that the UK economy will avoid a technical recession and return to modest growth in the third quarter of the year, amid a "continued lack of clarity" over the outcome of Brexit and deteriorating global economic conditions.

Business investment is now forecast to decline by 1.5 per cent this year and by 0.1 per cent in 2020, which together with the decline of 0.4 per cent in 2018, would be the longest period of sustained full-year declines in business investment for 17 years, the BCC said.

"Relentless Brexit uncertainty and the diversion of resources by many businesses to guard against the chaos of a messy and disorderly Brexit, are expected to limit investment intentions over the forecast period," its report on Monday said.

UK productivity is projected to be more subdued than in previous forecasts, suggesting that by the end of 2020, the economy will have experienced its weakest decade of average annual productivity growth on record, the BCC said.

Adam Marshall, director general of the BCC, said their latest forecast shows a number of warning lights are flashing for the UK economy, "even if we are able to avoid a messy and disorderly exit from the EU" in a few weeks' time.

"There's no dancing round the fact that Brexit uncertainty has hit business investment hard," Marshall said.

"In addition to reaching a negotiated settlement with the EU, the Government should be preparing big new incentives for business investment in the UK, and should reconfirm its unconditional backing for the big infrastructure projects our economy needs to unlock growth."

It said amid a slowing global economy and continued political uncertainty, the British government needs to use its autumn budget to back infrastructure, help businesses train and re-skill more people, and cut the high up-front costs of doing business in the UK.

BCC head of economics, Suren Thiru, said the latest outlook indicates that the UK economy is "set to stumble down an ever more sluggish growth path" over the near term, unless decisive action is taken.

"The prolonged nature of the Brexit uncertainty, including the still real risk of a no-deal exit, together with a deterioration in global economic conditions are expected to weigh on investment, trade and productivity - important determinants of economic growth," Thiru said.

A government spokesman said wages have grown faster than inflation for 12 consecutive months, employment is at a record high and the lowest paid workers have benefited with wage rises under the National Living Wage.

Australian Associated Press