THE British Chambers of Commerce has raised its UK growth forecasts slightly for this year, 2014 and 2015, but has also increased its unemployment projection.
It is also warning that growth is still too weak and that the economy is facing many challenges, domestically and internationally.
In projections published today, the BCC has raised its forecast of UK growth this year from 0.6% to 0.9%. This increased projection remains way adrift of the UK's long-term average annual growth rate of about 2.5%.
The BCC has raised its forecast of UK growth in 2014 from 1.7% to 1.9%, and increased its projection for 2015 from 2.2% to 2.4%.
However, it is now projecting that UK unemployment, on the International Labour Organisation measure, will reach 2.65 million in the third quarter of 2014. It notes that this figure is 50,000 higher than it predicted in March, and is equivalent to an unemployment rate of 8.1%.
Figures published this month by the Office for National Statistics put ILO unemployment at 2.52 million, a rate of 7.8%, in the January to March period.
BCC director-general John Longworth said: "The upward revision in our growth forecasts is encouraging."
However, he added: "Unfortunately, this does not change the fact that economic growth is still too weak, and the pace of recovery will remain unduly slow for a while yet. We are still a far cry from getting the economy fully back on track. The UK is, and will for some time, be performing below its potential."
David Kern, BCC chief economist, said: "The two main risks facing our forecast are worsening eurozone prospects and an upturn in UK inflation, which would squeeze real incomes and could harm growth.
"Any attempts to boost exports by encouraging a weaker pound, such as extending quantitative easing, could prove counter-productive as the damage caused by imported inflation is likely to outweigh the small benefits to exporters."
He added: "Efforts to rebalance the economy towards exports should be supported by measures such as greater funding for trade promotion."
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