Although the UK economy continued to grow in the second quarter of this year, business chiefs warned that underlying weaknesses remained.

“With very austere times ahead, no one should kid themselves into thinking that the UK’s economic recovery is totally secure,” said British Chambers of Commerce (BCC) director-general David Frost.

The BCC’s latest economic survey, published just two days ahead of the Bank of England’s Monetary Policy Committee’s July meeting on interest rates, said the weaknesses in the economy cannot be ignored if we are to avoid a relapse into recession.

Although the survey, based on data from more than 5,600 firms, noted that key indicators such as employment expectations, investment plans, export orders and domestic sales grew in the second quarter of this year, other factors were a cause for concern.

These included a weak service sector and the fact that 80 per cent of manufacturers reported that the cost of raw materials was still going up – “a potentially big issue bubbling under the surface”, as Mr Frost put it.

“On the whole these results are positive, especially in manufacturing, and they should offer encouragement that the UK’s recovery remains on the right track.”

However, BCC chief economist David Kern warned: “The service sector, which accounts for the bulk of GDP in the UK, is not recovering at an adequate pace and this heightens the threat of an economic setback.

“This quarter’s poor cash flow data, in both manufacturing and services, indicates that many businesses are still facing serious financial difficulties.”