A report by the EY Item Club has suggested that strong capital investment by businesses and low interest rates will aid the UK economy in growing faster in 2014 than any other G7 economy.The Item Club has raised its forecast for growth this year to 3.1% up from 2.9% . The increase is based on interest rates not rising this year and an unexpected 12.5% jump in business investment. The Item club firmly believes that interest rates will not rise until the first quarter of 2015 due to wages rising slower than the rate of inflation. However, the prediction is in stark contrast to the market consensus, which is for a rise later this year. Last month, Bank of England Governor Mark Carney signalled that rates could well rise sooner than most expected.The latest figures showed that wages are rising by just 0.7% excluding bonuses and the current level of inflation was up from 1.5% to 1.9% in June.Peter Spencer, chief economic adviser to the Item Club, said “The markets are jumping the gun in thinking that rates will rise this year.”“Low inflation, the strong pound and ongoing risks from the eurozone all suggest caution in raising rates.”
Official figures show that UK GDP rose by 0.8% in the first three months of the year. This represents the longest positive run since the financial crisis and is the fifth consecutive quarter of positive growth.The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.Setfords Solicitors are a national full service law firm, with business law solicitors in Guildford and across the country.