The Bank of England is likely to raise interest rates twice this year and twice in 2019, despite a sluggish economy, says influential forecasting group the EY Item Club.

Bank governor Mark Carney has said a rate rise is “likely” this year, but any increases will be gradual.

However, the EY Item Club-says a tight labour market and firming earnings growth is likely to fuel “hawkish instincts” at the Bank.

The impact on UK companies is inevitably going to be felt as consumers tighten spending- so business models will need to adapt to weakening demand.