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Businesses should take a “leap of faith” and invest for the future despite current economic and political uncertainty, UK companies have been told.

The latest economic forecast from the ICAEW predicts GDP growth of 1.6% in both 2017 and 2018, 0.8% slower than the average for the past three years.

Its report shows that business investment flatlined in Q2 2017, after a 0.6% rise in the first three months of the year.

The Institute of Chartered Accountants in England and Wales said the data needed treating with caution, as it may be revised in subsequent quarters, but said there was strong evidence that businesses are in no rush to undertake major investment spending at present.

The report said: “Our forecast, driven by indicators from the BCM survey, suggests investment will be flat in 2017 and fall by 1.1% in 2018.

“The degree of political uncertainty, both in a domestic context and with respect to the UK’s relationship with the EU, is clearly a key driver of this reticence.”

However, in several respects the fundamental economic conditions relevant for capital spending decisions remain positive.

Michael Izza, ICAEW chief executive, said: “Businesses are in no rush to make major capital investments at the moment. With corporate balance sheets and profitability healthy, borrowing costs low and demand from the UK’s major trading partners strong, businesses could be investing now for the future.”

ICAEW is a global professional membership organisation that promotes, develops and supports more than 147,000 members worldwide. The group’s financial experts offer insights into business and the economy that help to shape government policy and regulation.