The UK economy will grow by less than expected in 2011 but growth in 2012 will be better than predicted, the British Chambers of Commerce forecasts.

The group downgraded its forecast for UK GDP growth in 2011 to 1.4% from a December forecast of 1.9%.

The BCC said the downward revision was due to an unexpected fall in 2010's fourth quarter GDP.

Interest rates

In its forecast, the BCC increased its estimate for unemployment for early 2012 to 2.65 million, up from 2.6 million.

However, the business group raised its prediction for growth in 2012 to 2.3% from 2.1% in December.

At the weekend, David Cameron gave a speech at the Conservative Party spring conference in Cardiff highlighting the importance of the private sector to the UK's economy.

He pledged to stand behind entrepreneurs and stand against what he called the "enemies of enterprise".

"While we support efforts to reduce the UK's deficit, these measures alone will not deliver a sustainable recovery," he added.

The BCC said it believed that the Bank of England would raise interest rates in May from the current historical low of 0.5%.

But the group warned that such a move could be premature at this stage of the economic cycle.

'Difficult task'

Separately, financial services firm PricewaterhouseCoopers (PwC) issued a report suggesting that the monetary policy committee (MPC) of the Bank of England should not raise interest rates before the economic recovery is secure, despite concerns over inflation.

"The MPC faces a difficult task in balancing upside risks to inflation against downside risks to growth," said John Hawksworth, PwC's chief economist.

"Our own judgement, however, is that the MPC should not be increasing rates until it is clear that the recovery is secure," he added.

"We do not believe that it needs to increase interest rates immediately to meet its target of a 2% CPI inflation rate in two years time."

Source: http://www.bbc.co.uk/news/business-12672276