Economists have cut their British growth forecasts for this year and next, blaming a worse than expected performance in the first three months of 2005 and – to a lesser extent – high oil prices, a Reuters poll shows.

Respondents to the July 12-14 survey said that any impact on economic growth from a possible loss in confidence after bomb attacks in central London earlier this month was likely to be limited and short lived.

The median of 28 forecasts showed Britain’s gross domestic product (GDP) growing 2.0 percent this year and 2.3 percent in 2006. The last poll, in April, had pointed to growth of 2.6 and 2.5 percent, respectively.

Since then, data has shown that in the first three months of 2005, the UK economy grew just 2.1 percent year-on-year – much less than the 2.8 percent growth forecast in the April poll.

The Office for National Statistics has also revised up growth figures for the last few years, meaning that annual percentage gains for this year are likely to be lower.

Consumer confidence and retail sales could be affected in the coming weeks if people stay away from shops and public transport following the July 7 bomb blasts on London underground trains and a bus.

However respondents to the survey said the attacks should not have any long-term impact on economic activity.

“July data will capture sentiment and so on following the attacks and it may well be that confidence has deteriorated slightly,” said Mark Miller at HBOS Treasury Services. “But I think the direct effect might be quite limited.”

In trying to gauge the possible effect of the attacks on UK growth, economists noted that the Madrid train bombing in 2004 did not have a marked effect on the Spanish economy.

Economists said they were factoring an average oil price of around $52 a barrel for Brent crude for this year – around $6 below current levels. Expensive oil has pushed up costs for manufacturers who have been unable to pass on much of the increases to their customers due to the current slowdown in consumer spending.

Industrial production was expected to fall on an annual basis for the rest of this year, resulting in a full-year output contraction of 1.0 percent, according to the poll.

Consumer price inflation was forecast at 1.9 percent for 2005, just below the Bank of England’s 2.0 percent target.

With inflationary pressures relatively subdued, consumer spending slowing down and the manufacturing sector contracting, the Bank of England was widely expected to cut rates soon.

In this month’s poll the medians showed rates cut by a quarter percentage point to 4.50 percent by the end of September, to 4.25 percent in the first quarter of 2006 and to 4.00 percent by early 2007.

The gradual loosening of monetary policy was expected to boost Britain’s growth prospects in 2006.

Forecasts for next year’s GDP growth ranged from 1.6 to 3.0 percent.