Britain is locked into a “low growth trajectory” that will see GDP growth dip next year while the eurozone shrugs off Brexit uncertainty to stretch ahead, according to a leading business group.

The British Chambers of Commerce said a squeeze on household budgets and the failure of exporters to capitalise on the low pound meant the UK was “treading water”.

In the latest downbeat view of Britain’s prospects as the Brexit date nears, the BCC cut its growth rate forecast for 2018 to 1.2% from 1.3%. The prediction for 2019 was also lowered, to 1.4% from 1.5%. Meanwhile, the European Central Bank confirmed eurozone growth forecasts of 1.8% for 2018 and 1.7% for 2019 as the economic recovery of the single currency bloc continues.

Adam Marshall, the BCC’s director general, said: “While some businesses report strong trading conditions, the UK economy as a whole is treading water, and there is no sign on the horizon of a return to healthier levels of growth.”

Marshall said the outlook for 2017 was slightly healthier than previously thought, with a rise in the growth forecast from 1.5% to 1.6%, driven by a moderately stronger outlook for consumer spending growth in 2017.

But he said the prospect of inflation returning to 3% by the end of the year and the likelihood that it would stay above wages growth throughout 2018 meant the current strength of consumer spending would falter.

“Our forecast suggests that the hoped-for rebalancing of the UK economy towards investment and export is unlikely to materialise in the medium term. The rising upfront cost of doing business in the UK, the uncertainty around Brexit, and the constraints created by skills gaps and shoddy infrastructure collectively outweigh any benefit arising from the recent depreciation of sterling,” he said.

The situation could turn around, said Marshall, if No10 can hammer out plans for a transition deal with Brussels and the Treasury “pulls out the stops” to support business growth in the autumn budget with a series of commitments to infrastructure spending and extra public investment.

In the meantime, export growth is being offset by the strength of demand for imports, despite the higher price of goods from abroad.

Modest export growth of 3.1% this year is expected to slow to 2.9% in 2018 and 2.8% in 2019 while its import growth forecasts have been upgraded to 2.9% in 2017 from 2.5%, to 1.5% in 2018 from 1.3%, and to 2% in 2019 from 1.8%.

Suren Thiru, head of economics at the BCC, said: “The changes to our growth forecast suggest that the UK economy is likely to remain on a low-growth trajectory.

“It is increasingly clear that the post-EU referendum slide in the value of sterling has done more harm than good. Inflation is being driven by the sizable increases in the cost of imported raw materials over the past year, and is expected to remain a drag on consumer spending over the near term, with pay growth not expected to outpace price growth until 2019.

“While the outlook for UK exporters is for modest growth, imports are expected to grow at a faster rate than we previously forecast, with little evidence that consumers or firms are switching away from imports towards domestic alternatives despite their rising cost.

“Although there remains considerable uncertainty over the UK’s growth prospects, the risks to our current outlook are to the downside. On Brexit, our forecast implicitly assumes a relatively smooth exit from the EU. A more sudden departure would be likely to trigger a far more marked weakening in economic conditions.”

The European Central Bank revised up its forecast for eurozone growth in 2017, to 2.2% from a previous forecast of 1.9%, which would be the strongest rate of annual growth in the single currency bloc in a decade.

Mario Draghi, president of the ECB, said the 2017 growth forecast had been revised up because the economy had been stronger-than-expected in the first half of the year and was continuing to perform well.

“Economic expansion, which accelerated more than expected in the first half of 2017, continues to be solid and broad-based across countries and sectors,” he said at a press conference in Frankfurt, after the Bank announced its decision to leave interest rates and quantitative easing unchanged.