The British Chambers of Commerce cut its 2005 economic growth forecast to 2.0 percent on Tuesday as it predicted a slowdown in household consumption and a weak manufacturing sector would drag on activity.

The business lobby group had forecast in May that the British economy would grow 2.4 percent this year. “The slowdown in UK GDP growth is mainly being driven by sharply lower growth in household consumption, as the cooling housing market and the higher personal debt burden dampen spending,” the BCC said in its quarterly economic forecast.

It also lowered its forecast for 2006 economic growth to 2.2 percent from an original 2.3 percent forecast in its May report. The BCC’s predictions come after the Bank of England cut interest rates to 4.5 percent to shore up sagging consumer spending and business investment.

The Bank also toned down its outlook for growth this year and said household spending posed a significant downside risk but was bullish on economic prospects further out.

The Confederation of British Industry, a leading employers’ group, will publish its latest 2005 growth forecast today, along with its closely-watched monthly Industrial Trends survey for August, a barometer of manufacturers’ health.

But official GDP data due at 0830 GMT on Friday, is expected to show the British economy expanded by more than originally thought in the second quarter.

Analysts expect the second estimate of Q2 GDP to be revised up to an annual growth rate of 1.8 percent compared with 1.7 percent reported last month.

The BCC’s revised 2005 growth forecast is significantly lower than the 3.0 to 3.5 percent predicted by Chancellor of the Exchequer Gordon Brown, a projection on which his borrowing plans are based.

But it said that while tax rises in 2006 could probably be avoided, they were likely to be needed in 2007 or 2008, if Brown was to keep meeting his Golden Rule – that he only borrows to invest over the economic cycle.