31 July 2011 Last updated at 19:57 ET

UK economy to grow at 'sluggish' rate, CBI predicts

The UK economy is growing but the pace of growth slowed in the last quarter

The UK economy will grow at a "sluggish" rate this year, according to the CBI.

The group has lowered its forecast for the UK's GDP in 2011, predicting growth of 1.3%, down from its previous prediction of 1.7%, made in May.

But the CBI still expects the economy to pick up in 2012.

"The economic outlook has become even more challenging but we still expect the economy to continue to grow modestly this year," the group said.

Last week the Office for National Statistics said the UK grew by 0.2% in the three months to 30 June, down from 0.5% in the previous quarter.

The UK government's Office for Budget Responsibility expects the economy to grow by 1.7% in 2011 - higher than most independent forecasts for the British economy.

"The global economy has slowed in the face of several shocks including the Japanese tsunami and soaring commodity prices," CBI director general John Cridland said.

The CBI also warned that investor confidence had been eroded due to the twin debts crises - the Greek sovereign debt crisis in the eurozone and the political impasse over raising the debt ceiling in the US.

The CBI expects "relatively modest" investment growth of 3.7% in 2011.

It expects the UK economy to grow by 2.2% in 2012, the same as it predicted in May.