​London, Dec 13 (IANS) Growth in the British economy in 2016 is set to be stronger than expected, but the momentum is unlikely to be maintained into 2017, the British Chambers of Commerce (BCC) has forecast.

The industry representative body with member firms that employ around 5 million workers, increased its forecast for growth in 2016 to 2.1 per cent from 1.8 per cent in the previous quarterly forecast in September.

The improvement in the forecast was supported by better-than-expected growth figures for the third quarter of 2016, with growth recorded at 0.5 per cent, Efe news reported.

However, the forecast growth figure for 2017 was reduced to 1.0 per cent from 1.1 per cent, well below the British growth trend of 2-2.5 per cent.

It would also be the lowest annual growth since the 2008 financial crisis, if it was correct.

The expected negative effects of the Brexit vote was not felt by businesses as yet, with some benefiting from a sharp reduction in sterling on foreign exchange markets in the wake of the June 23 vote.

BCC Head of Economics Suren Thiru said: "We have upgraded our growth forecasts for 2016 and 2017, but the near-term outlook for the British economy remains challenging, with the recent resilience in growth expected to weaken."

"Higher inflation and continued uncertainty over Brexit will weigh on the British growth prospects, with consumer spending and business investment likely to be hardest hit.

"Average earnings should hold steady but inflationary pressures are expected to erode real wages, which will hit the spending power of households," Thiru analyzed.

Inflation was forecast to rise from the current 0.9 per cent (latest figures, for October) to 2.1 per cent 2017 and 2.8 per cent in 2018.

As a result, higher inflation was expected to curb household consumption -- the current main driver of growth; and GDP in 2018 is forecast to grow by 1.4 per cent, down from 1.8 per cent forecast in the last quarterly report.

In addition, lower levels of business investment are now expected, as firms react to the uncertainty of the Brexit process.

BCC Director General Adam Marshall said: "In the absence of a clear road ahead, many companies have been adopting a 'business as usual' approach in the months since the referendum, which has kept conditions buoyant in 2016 and prevented a sharp slowdown in growth."

Marshall said some firms see significant opportunities over the coming months, but others have identified increasing uncertainty, which was weighing on investment expectations and forward confidence.

"Lower sterling and rising inflation are now starting to affect business communities and consumers.

"While a lower pound is a boon for some exporting businesses, many others see the latest devaluation of sterling less positively, as they are unable to benefit from it," Marshall added.