Britain's economy is forecast to grow merely 0.4 percent this year as it is impacted by lack of investment, said an independent forecasting group on Monday.

According to a spring forecast report issued by the Ernst & Young Item Club, Britain may avert a recession this year, but the growth is likely to be even lower than last year's 0.7 percent. It is expected to rise to 1.5 percent in 2013.

The growth is restrained by lack of investment as British corporations are stockpiling cash on their balance sheets at an accelerating pace.

The Item Club forecast that business investment will increase by just 1.2 percent this year, which "will not be sufficient to get the economy moving rapidly."

But it will start to "pick up more convincingly next year, with growth of 6 percent, followed by nearly 10 percent in 2014."

At the same time, capital spending in the public sector is falling back sharply now. Even with housing investment picking up, economy-wide investment falls again this year. It is to grow by 4.1 percent next year before accelerating to 7.8 percent in 2014, the Club predicted.

"Business investment has picked up nicely in the U.S., but UK companies remain extremely risk-averse, which is sapping strength from the economy," said Professor Peter Spencer, chief economic adviser to the Item Club.

"Until these companies stop stashing the cash and start increasing levels of investment and dividends, the economy will remain on the critical list," he said.

"Export markets are a big challenge for British businesses at the moment," the Item Club said.

Britain's exports to Europe have inevitably been influenced by the problems in the eurozone, but exports to non-European destinations have been performing well.

Exports of goods increased by 5.1 percent last year in volume and exports of services were up by 3.9 percent.

The Item Club expected exports to grow by 4.5 percent this year and imports by 3.5 percent.