UK businesses expect zero growth over next 3 months, survey shows

British businesses do not expect any growth over the next three months, as a surging cost of living squeezes consumer demand, a monthly survey showed on Sunday.

The Confederation of British Industry (CBI) said members reported above-average growth in the three months to the end of July - slightly faster than in the three months to June - but expect this to peter out in the months ahead.

"As firms and consumers continue to be buffeted by rising prices, private-sector activity has slowed to a near standstill," CBI economist Alpesh Paleja said.

The Bank of England is widely expected to announce its biggest interest rate rise since 1995 on Thursday, raising rates to 1.75 per cent from 1.25 per cent to tame inflation that is already at a 40-year high of 9.4 per cent.

However, the BoE has warned that Britain's economy is likely to contract later this year, when a 40 per cent jump in regulated energy tariffs hits consumers in October, and has forecast the economy will contract slightly next year.

The United States shrank in both the first and second quarters of this year, meeting one commonly used definition of recession.

Last week the International Monetary Fund forecast Britain would see the weakest growth of any major economy other than Russia next year.

The CBI said its monthly output balance, based on surveys of manufacturers, services companies and retailers, rose to +8 for the three months to July from +5 for the three months to June. July's expected balance for the next three months was zero, up from -3 in June.

Manufacturers expect current slow growth to persist, while consumer services and retail businesses see a fall in sales, and business services expect growth to slow, the CBI said.

"This is unsurprising, given that strong inflation has been pushing real wages down sharply, and consumer confidence is at an all-time low," it added.