UK economists have cut their growth forecasts for this year and next, blaming a worse than expected performance in the first three months of 2005 and - to a lesser extent - high oil prices, a Reuters poll shows.

Respondents to the July 12-14 survey said that any impact on economic growth from a possible loss in confidence after bomb attacks in central London earlier this month was likely to be limited and short lived.

The median of 28 forecasts showed Britain's gross domestic product growing two per cent this year and 2.3 per cent in 2006. The last poll, in April, had pointed to growth of 2.6 and 2.5 per cent, respectively.

Since then, data has shown that in the first three months of 2005 the economy grew just 2.1 per cent year-on-year - much less than the 2.8 per cent growth forecast in the April poll.

The Office for National Statistics has also revised up growth figures for the last few years, meaning that annual percentage gains for this year are likely to be lower.

"Just plugging new numbers into the model knocked about half a percentage point off GDP growth. It's going to be closer to two per cent on the basis of the new numbers... without even altering the quarter-on-quarter GDP growth projection for the rest of this year," said Ross Walker at RBS Financial Markets.

"It's partly a momentum issue, in that there has been for example a sharper slowdown in household spending and household consumption than there was previously."

Consumer confidence and retail sales could be affected in the coming weeks if people stay away from shops and public transport following the July 7 bomb blasts on London underground trains and a bus.

However, respondents to the survey said the attacks should not have any long-term impact on economic activity.

"July data will capture sentiment and so on following the attacks and it may well be that confidence has deteriorated slightly," said Mark Miller at HBOS Treasury Services. "But I think the direct effect might be quite limited."

In trying to gauge the possible effect of the attacks on growth, economists noted that the Madrid train bombing in 2004 did not have a marked effect on the Spanish economy.

Economists said they were factoring an average oil price of around $52 a barrel for Brent crude for this year - around $6 below current levels. But only seven of the 16 who answered the question said the cost of oil had prompted them to downgrade growth forecasts.

"The higher oil price will reduce global growth, which will reduce demand for UK exports. Also (it) is feeding through to higher petrol prices and utility bills for consumers," said Hann-Ju Ho at Stone & McCarthy. "However, the UK is a small net exporter of oil hence in the very short term (one to two quarters) the higher oil price may actually help UK growth."

Expensive oil has pushed up costs for manufacturers who have been unable to pass on much of the increases to their customers due to the current slowdown in consumer spending.

Industrial production was expected to fall on an annual basis for the rest of this year, resulting in a full-year output contraction of one per cent, according to the poll. Consumer price inflation was forecast at 1.9 per cent for 2005, just below the Bank of England's two per cent target.

With inflationary pressures relatively subdued, consumer spending slowing down and the manufacturing sector contracting, the Bank of England was widely expected to cut rates soon.

In this month's poll the medians showed rates cut by a quarter percentage point to 4.50 per cent by the end of September, to 4.25 per cent in the first quarter of 2006 and to four per cent by early 2007.

By contrast in April most had still expected that rates would be raised one more time, to five per cent.

The gradual loosening of monetary policy was expected to boost the country's growth prospects in 2006.

"We have a rate cut now in August and a further quarter point reduction early next year... that will give a little bit of support to the consumer sector", said Walker at RBS. Forecasts for next year's GDP growth ranged from 1.6 to three per cent.