The UK economy is still facing "serious challenges", debt levels are still too high and unemployment will increase to almost three million next year, a leading business group predicted Monday.
The British Chambers of Commerce downgraded its prediction for economic growth in 2012 to 0.6 percent from 0.8 percent, rising to 1.3 percent in 2013.
The Chancellor, Finance secretary, must "pull out all the stops" to help businesses drive growth this year, the BCC said in its quarterly economic forecast. The BCC said that despite weak growth this year, it believed a double dip recession will be avoided, with exports and business investment expected to be the main drivers of growth over the next two years.
Unemployment will increase from the current 2.6 million to 2.9 million at the start of next year, with the jobless rate for 18 to 24-year-olds expected to be around 23 percent, said the BCC. Economic growth is likely to weaken in the second quarter of the year because of the extra public holiday for the Queen's diamond jubilee, while the London Olympics might distort growth figures in the summer, said the report.
Interest rates will remain at "very low levels" for longer than previously envisaged, staying at 0.5 percent until the final months of 2013, followed by modest increases, according to the business group.
The BCC called on Chancellor George Osborne to take measures in this month's Budget to help business, including help for smaller firms trading internationally, and deregulation of the labour market.
John Longworth, the BCC's director general, said: "The UK economy faces serious challenges, with problems in the eurozone creating difficulties for exporters, combined with dampened domestic demand.
"With one quarter of negative growth behind us, growth will be slow in 2012, but we believe a recession will be avoided. Our economic forecast underlines the need for the Government to deliver a Budget that will bring confidence to businesses".
He stressed that "Only the private sector will drive recovery and help deliver public services, like education, healthcare and pensions.
"A sustainable recovery depends on creating the right conditions to empower businesses to drive growth. Companies need the best possible environment to generate wealth and create jobs".