Projections from economic forecasters indicate that the UK economy will grow by more than 3% this year, according to the latest figures released on Tuesday by the Centre for Economics and Business Research (Cebr), an independent commentator on economics and business trends.
Cebr’s latest forecast has been revised upwards to show that UK economy is expected to grow by 3.1% in 2014 and 2.2% in 2015, compared to predictions made at the beginning of the year of 2.8% and 2.0% respectively.
Confidence in the economic prospects for the UK is strong and is expected to result in business investment growing by 10.1% in real terms this year, which will help the economy in the UK to become more balanced. Household consumption accounted for 81% of the economic growth in 2013, but this is expected to fall to 46%.
It is also anticipated that real household disposable incomes will increase by 1.5% this year, following a drop of 0.6% in 2013. Living standards are predicted to improve with earnings growing and inflation staying below 2% throughout 2014. Household incomes will also be helped by lower unemployment.
In addition, Cebr’s figures show that there has been a robust pickup in the housebuilding construction sector, especially in London.
However, the growth in the UK economy is expected to reach a peak in 2014. Reduced saving and a return to typical levels of consumer confidence, weakness in the current account and government spending cuts are all expected to present challenges to the economy in 2015 and 2016. The UK still needs to improve its trade position and Cebr has forecast a record-high current account deficit of GBP79bn in 2014. The deficit is expected to remain high throughout much of Cebr’s forecast period, which could result in a depreciation of sterling because of market concern about continuing trade weakness.
The Cebr also expects real government spending in 2014 to be 1.8% higher than in 2010, as spending cuts take effect. Cebr also forecasts that real government spending will fall by 2.1% over the course of the next parliament from 2015 to 2020.
Cebr provides analysis, forecasts and strategic advice to companies of all sizes, financial institutions, government departments and agencies, trade bodies and the European Commission. Its forecasts for UK economy are published by the Treasury and are used by business people and policy makers.