Economic conditions remain "sluggish" and the forecast is subdued, according to the latest Quarterly Economic Survey from the British Chambers of Commerce.
Based on the responses of over 6,000 UK businesses, the BCC survey finds that trading conditions are challenging, despite a modest improvement in activity in the second quarter of 2018. Retail and hospitality firms are finding conditions particularly challenging, as consumer spending remains subdued.
The picture is brighter for manufacturing. The balance of manufacturing firms reporting improved domestic sales rose in Q2 2018, and the balance of firms reporting improved orders increased to the highest level since Q1 2015. However, the size of the sector means that its contribution to UK growth remains limited.
Looking ahead, the BBC survey has found that a number of the key forward-looking indicators point to a subdued outlook. Business confidence and investment plans have both declined. The biggest concern for businesses continues to be difficulties accessing skilled labour.
The BCC report concludes that the UK economy is in a "holding pattern", with annual growth this year set to be the lowest since the financial crisis.
Suren Thiru, BCC head of economics, said: "Our latest survey indicates that UK economic conditions remain subdued. While the modest pick-up in domestic activity points to a slight rebound in growth from a weak first quarter, there remains little evidence in the current data to suggest a sustained upturn in the UK's economic growth prospects.
"Activity in the key services sector remains moderate, with most of the main indicators are still below their pre-EU referendum levels. While still high by historic standards, the easing in export sales in the manufacturing sector points to a tightening in trading conditions. With growth in key markets moderating and the impact of the post-EU referendum slump in sterling dissipating, the improvement in the UK's trade position in Q1 may well be short-lived."
The British Chambers of Commerce is calling on the Government to "fix the fundamentals" for business - including training, connectivity, infrastructure and investment.
Adam Marshall, BCC director general, said: "Business needs clarity on Brexit, and a strong domestic agenda that creates a 'Brexit hedge' as we navigate turbulence over the next few years. Big, bold action is needed for the UK to buck the current slow-growth trend."