EY ITEM Club forecast of continued UK growth will benefit the CI

The UK recovery has finally got legs, says the latest economic forecast from the EY ITEM Club, with consumer spending and the housing market propping up GDP this year until the long awaited revival in exports and business investment kicks in next year.

According to the EY ITEM Club's Summer Forecast, UK GDP will reach 1.1% this year, before accelerating to 2.2% in 2014 and 2.6% in 2015.

“It's looking much more positive,” says Peter Spencer, chief economic advisor to the EY ITEM Club, “and we're unlikely to see a repeat of 2011 when a recovery in confidence was crushed by the Euro crisis.

“Spending on the high street is holding up nicely, housing market transactions are beginning to gather pace and, perhaps most significantly, the global economy also appears to be on the mend. In fact, it's the first time in many months where we can see balanced growth in the economy.”

Despite only modest increases in real incomes, consumer spending will continue to improve this year, funded by consumers' savings. The EY ITEM Club says spending is likely to grow by 1.6% this year, rising to 1.9% in 2014.

Business investment is also expected to increase by 8.1% next year, 9.4% in 2015 and 7.5% in 2016, providing the UK with balanced, sustainable growth over the medium term.

Increased business investment and economic activity in the UK and across Europe is good news for the Channel Islands, according to Andrew Dann, EY's Channel Islands Managing Partner.

“UK companies have been hoarding cash and as their confidence grows we can expect them to seek new investments, particularly through M & A activity.
Whilst the EY ITEM Club report does not look at the Islands specifically, our economy is closely linked to that of the UK and the return of consumer and business confidence will have a positive knock-on effect in the islands.”