Both household consumption and business investment are also expected to remain sluggish in the coming years. Inflation is also expected to rise and outpace earnings until 2019, eroding real wages and weighing on consumer spending, a key driver of UK economic growth.
"Following the welcome news that the prime minister has reached a deal on the first phase of Brexit negotiations, it is now crucial to deliver a firm transition period and clarity on the nature of the UK's future trading relationship with the EU," Dr. Adam Marshall, director general of the BCC, said.
Mr. Marshall stressed that "certainty over the course of Brexit would also help to stabilize markets, and reduce the volatility of sterling, which businesses say is increasing their costs."
Even the best possible Brexit deal will not be worth the paper its written on, Dr. Marshall warned, if the British government fails to address the many long-standing and well-known barriers to growth in the UK.
"Every-rising upfront costs, a labor market at capacity, growing pressure on land use, and a physical and digital infrastructure in need of investment and expansion, all prevent UK firms from reaching their potential. While the recent budget made some welcome steps in the right direction, concerted and sustained action to fix the fundamentals is needed to encourage business investment and growth," explained the director general.
The downgrades to the growth forecast confirmed the British economy is in a challenging period with growth likely to remain well below average for a prolonged period, Suren Thiru, head of economics at the BCC warned.
Continued uncertainty over Brexit together with the burden of upfront cost pressures meant businesses are likely to stifle any thoughts towards business investment.
The news comes as the BCC together with identical organizations from six countries bordering the North Sea called for the swift commencement of transition and trade talks between Britain and the EU.
In a joint statement issued on December 11, the chambers of commerce of seven countries, altogether accounting for 70 percent of EU-UK trade in both directions, demanded clarity on what the future relations will look like. It called also on the negotiators to strive to a "trade-friendly" agreement with a realistic transition period.