EY predicts UK growth

An EY Item Club report has predicted Low inflation and stronger eurozone growth helping the UK economy expand 2.8% this year.

It said that while low inflation was adding to the benefits of higher employment and the positive effects of lower oil prices, future problems could include a weak government and EU referendum.

Item Club chief economic adviser Peter Spencer said the financial markets seem prepared for further Greek problems.

The forecast growth is slightly down on the 2.9% expansion that the Item Club previously predicted, but the prediction is growth of three per cent in 2016.

With inflation falling to zero, increased customer confidence has been consolidated by improvements in employment.

The report said an added bonus was coming from recovery in the eurozone, helped by the European Central Bank’s €1.1tr (£790bn) asset purchase stimulus programme.

Peter said, ‘The economy is taking the general election in its stride as ‘noflation’ trumps politics. The eurozone recovery is bedding in and completes the positive UK growth picture that we anticipate for 2015 and 2016.

‘This is a mirror image of what we saw in 2010-12, when unemployment and inflation were high and Europe was in the doldrums.

‘If the strength of the headwinds that held back the economy during the first years of the coalition is anything to go by, the tailwinds enjoyed by a new administration post 7 May should be strong enough to outweigh the effects of any political uncertainty.’

UK exports are predicted to rise by 5.9% this year and 4.9% in 2016.