Manufacturing and export growth fell steeply in the third quarter in what may be the "first alarm bell" for the economy, a leading business group said today.
Figures compiled by the British Chambers of Commerce (BCC) suggested that while the UK was still growing, expansion slowed during the period, with a poll of more than 7,000 firms showing the increase in domestic sales and orders in manufacturing dropped sharply following all-time highs in the second quarter.
Growth in exports fell for both manufacturing and the dominant services sector, which represents three-quarters of UK output.
BCC chief economist David Kern said: "These results point to continued UK economic growth, but the pace is easing. The signs of the slowdown are particularly noticeable in manufacturing, where all the key domestic and export balances recorded declines in Q3.
"Noticeable falls in all the export balances and increased signs of slower growth require a forceful policy response.
"UK growth cannot rely permanently on consumer spending, and on unsustainable current account and budget deficits. Unless exports and investment play a bigger role in growth, the recovery will stall."
BCC director general John Longworth called for investment to help UK firms look for exports as well as reform of business rates, adding that concerns over the strength of the pound, together with the worsening outlook for the eurozone, reinforced the case against an early interest rate rise.
He said: "As we predicted in our economic forecast, the strong upsurge in UK manufacturing at the start of the year appears to have run its course. We may be hearing the first alarm bell for the UK economy, but this need not be the case.
"The disappointing decline in exports highlights that we must do something radically different. Britain faces a major challenge in improving its trade performance, so we must waste no time in supporting trade opportunities to overseas markets which offer sustained growth."
Latest data from the Office for National Statistics (ONS) showed the economy had recovered all the ground lost in the 2008/09 recession and by the middle of this year was 2.7 per cent ahead of its pre-recession peak.
Gross domestic product (GDP) grew by 0.7 per cent in the first quarter and 0.9 per cent in the second quarter. The International Monetary Fund's latest forecast suggests the UK remains on course to outpace the world's major economies with growth of 3.2 per cent this year.
But latest surveys showed manufacturing growth slowed to a near standstill in September while the expansion in services also eased. The CBI said last month that it expected economic growth to slow in the second half of the year as the effect of improved confidence and better credit conditions start to wear off.